Getting a Money Settlement While on Government Benefits (Part 2)

                Last week I outlined for you a common call I receive from attorneys who have successfully obtained money recoveries for clients who are currently receiving or may in the future need government benefits.  Special needs trusts have become more widely known in recent years and recognized as “the solution”.  However, as I wrote last week that isn’t always possible or even desirable.  Let me explain.

                A special needs trust – or more specifically – one type of a special needs trust is a possible solution.  A first party special needs trust, also known by reference to the specific federal statute that authorizes it, a “(d)(4)(a) special needs trust, is funded with the beneficiary’s own assets.  This is to be distinguished from a third party special needs trust which is funded not with the beneficiary’s own assets but rather a third party’s assets.  This is commonly the case with parents who set up an SNT to receive the inheritance they intend to leave for a disabled child as part of their estate plan.

                There are some important requirements that must be satisfied in order to set up a first party SNT.  First is that the beneficiary must qualify as a disabled individual.  A decision by Social Security and receipt of Social Security disability benefits is the easiest way to establish this requirement.  A second requirement is that the beneficiary must be under the age of 65 when the trust is set up and funded.

                This age limitation is a common impediment to being able to set up an SNT.  Let me give you an example.  Attorney settles a negligence claim on behalf of a client who is currently in a nursing home on Medicaid.  The client is 70 years old so an SNT is not an option.  Receiving the money will cause the client to exceed Medicaid’s asset limit of $2000.  The client can give the money to the State of New Jersey and remain on Medicaid or keep the money but lose Medicaid.  This means he will have to pay the nursing home until the money is spent down and then reapply for Medicaid.  Neither option is appealing.  It leads to thoughts by the client of “why did I pursue the claim?” and “what benefit am I getting from this?”.

                 So, is that it?  Are there no other options?  Well, maybe yes, maybe no.  Next week I’ll share with a possible solution.