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It’s an important question for family members to ask: What happens to the Medicare set-aside (MSA) portion of their loved one’s settlement in the event there is still a balance when he or she passes away?

By law, Medicare is considered a secondary payor. However, that leftover money does not simply go away after a beneficiary dies.

What is a Medicare Set-Aside?

When an injured person receives a settlement from a workers’ compensation or liability lawsuit, a settlement planner creates an MSA account using a portion of the settlement proceeds to be used to pay for future medical expenses related to the injury or illness that Medicare would otherwise pay.

medicare set-aside after deathMSA Balance After a Claimant’s Death

If the claimant has named a beneficiary on the MSA account and has passed away before the MSA proceeds are exhausted, the remaining money will go to that person – but only the amount of money already in the MSA as cash. If there is no named beneficiary, then these funds would pass in accordance with state intestacy statutes.

The Problem with Annuities and Why You Should Get Your Own Expert

The vast majority of MSA’s are set up with life-only annuities with no remainder interest to any beneficiaries – a potential windfall to the insurance company who wrote the annuity (but not to the beneficiaries). Brokers often set up the cheapest annuities as a duty to the workers’ compensation carrier.

However, pursuant to the Centers for Medicare and Medicaid Service (CMS) Workers Compensation Guide, the use of annuities in MSA’s are not mandatory. MSAs can be funded with cash – which can then be passed onto a beneficiary of the MSA account when the plaintiff passes – or an alternative annuity arranged specifically for the specific circumstances.

Before you allow a good portion of your monies to be placed into an MSA, it’s critical to get your own settlement planning expert on board to ensure decisions are made in your (or your loved one’s) best interest. Injured plaintiffs and their families deserve to understand how their settlement money is helping them and how it will benefit them in the future. A trustworthy settlement planner will be an advocate to ensure the MSA balance will go where they want it to go if the beneficiary passes away.

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