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Bar News - August 19, 2015

Workersí Compensation & Personal Injury: Public Benefit Considerations for People with Disabilities


Personal injury attorneys necessarily focus their efforts on maximizing litigation recoveries for their clients, but advising clients in personal injury actions also requires that attorneys be sensitive to future care needs and government benefits available to address disability-related expenses.

Many litigators assemble a team of advisors to address their clientsí needs at all stages of the case. Involving a special needs planning attorney, whose services go beyond merely drafting a special needs trust (SNT), early on ensures that valuable government benefits and other planning opportunities are preserved and disability-related issues resolved with the most favorable outcome.

Many persons with disabilities depend on public benefits programs for their income, health care, or both. Receiving income or assets from a personal injury settlement may jeopardize eligibility for certain need-based programs. While the following hypothetical may represent an all-too-common litigation scenario, the public benefits issues implicated by the facts may not be readily apparent to even the most skilled practitioner:

John, 25, was injured in an automobile accident that rendered him a paraplegic. John receives care in a nursing home because he currently requires specialized medical care and significant assistance with his daily needs. Doctors believe he will be able to return home in the near future, although he will need adaptive devices and will continue to require assistance with activities of daily living. His residence and vehicle will need modifications to address his needs. Settlement discussions are underway when the special needs planning attorney is contacted to draft a SNT. The litigation attorney anticipates a lump-sum payment will fund the SNT, with net settlement proceeds structured to provide John monthly income for life.

Because John is competent and has living parents, his parents can create a SNT conforming with federal law, 42 USC ß 1396p(d)(4), and John can fund the SNT from settlement proceeds. If John were incompetent, a minor child or had no parents or grandparents, guardianship proceedings and court approval might be needed to create and fund his SNT.

Prior to settlement, it must be determined for which public benefits John may be eligible: Social Security Disability Insurance (SSDI) and Medicare based on his work history, Supplemental Security Income (SSI) due to an insufficient work history, or perhaps John is dually-eligible for SSDI and SSI. Ascertaining whether John will need Medicaid benefits in the form of in-home care is crucial, as is assessing whether John could obtain similar services through private health insurance, potentially purchased later using funds from his SNT.

Johnís eligibility for benefits must be determined in advance of settlement as certain public benefits have strict income and resource limits Ė i.e., SSI and Medicaid Ė and will be reduced or disrupted by Johnís receipt of a lump sum, monthly payments from a structured settlement or even SNT distributions made for food or shelter. Conversely, certain other public benefits Ė i.e., SSDI and Medicare Ė will not be so impacted. Therefore, if John requires Medicaid benefits to provide in-home care, and if he receives SSI, the use of and payments to his SNT must be carefully planned or John could lose both his cash and medical assistance benefits.

If structured settlement payments are made directly to John, each payment will be treated as unearned income to John when determining eligibility for SSI and Medicaid. In contrast, if payments are made to Johnís SNT pursuant to court order, they are not counted as Johnís unearned income for those programs.

Similarly, some SNT distributions, but not others, may be counted as income to John for certain public benefits program. For instance, if a home is purchased and modified to meet Johnís needs, how the house is titled could determine whether SNT distributions for real estate taxes or home maintenance will be considered his unearned income for New Hampshire Medicaid eligibility, as well as whether a caregiving parent will be required to pay a share of the propertyís carrying costs.

How a home is titled also may determine whether the property will be subject to Medicaid recovery by the state if John dies before reaching age 55. Given Johnís age, and depending on other factors, it may be advisable to purchase a house in Johnís individual name with a portion of the settlement proceeds.

Identifying the Medicaid program for which John qualifies will inform the future use of SNT funds. If John needs Medicaid coverage to pay for in-home care services, he also might be able to work part time after recovery, potentially making him eligible for benefits under the Medicaid for Employed Adults with Disabilities (MEAD) program. If he is eligible, the SNT could make more distributions on Johnís behalf, even if such distributions will count as unearned income, as the monthly income limit for MEAD is significantly higher than other Medicaid programs.

How a SNT is administered can impact financial eligibility for public benefits, so choosing the right trustee is crucial. Although Johnís parents may have the time and skills to manage his SNT, some family member trustees inadvertently use SNT funds incorrectly by purchasing items that either benefit themselves or bring the trust beneficiaryís income over the program limits, disrupting benefits. It may be wiser to name a corporate trustee that regularly administers SNTs and is knowledgeable about public benefits programs. However, the amount to be transferred to the SNT must be planned in advance thoughtfully, as a corporate trustee may require a certain amount of assets under its management.

Providing the best outcomes for clients with disabilities, then, requires advance planning and a skilled team to (a) evaluate the clientís needs, (b) identify eligibility for benefits programs, (c) determine if available private medical insurance will be sufficient, (d) review life care plans and early expenditures, (e) negotiate subrogation liens, (f) design a settlement structure accounting for the clientís needs and public benefits eligibility, (g) file guardianship proceedings, if necessary, to approve a settlement or create and fund a SNT, (h) prepare the SNT and choose the trustee, and (i) set reasonable expectations concerning restrictions on the use of SNT funds.

Ann N. Butenhof

Judith L. Bomster

Ann N. Butenhof is a partner at Butenhof & Bomster in Manchester and focuses her practice in the areas of elder law, special needs trusts, estate planning, and probate and trust administration. Judith L. Bomster is a partner at Butenhof & Bomster, where she focuses her practice on estate planning, special needs planning and elder law.

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