For those who receive benefits from certain government programs, obtaining a personal injury settlement could be detrimental to their eligibility. Thankfully, there are settlement planning tools available that allow beneficiaries to have their cake and eat it, too, so to speak. Options like a special needs trust ensure funds from a personal injury settlement go to expenses that means-tested government programs do not cover. That way, a disabled person can continue to receive benefits while making the most out of settlement.
It’s important to note that there are costs associated with establishing a special needs trust, which can be anywhere from $3,000 to $15,000. Hiring a trustee comes with additional fees, as does maintaining the trust. While a special needs trust may still be the answer regardless of the expenses of setting it up and maintaining it, it’s important to speak with a comprehensive settlement planner to get a full cost-to-benefit analysis.
What would that analysis entail?
A settlement planning expert will take a holistic look at the beneficiary’s entire financial situation, including the variety benefits available to him or her. For example, the person may be eligible for one or more of the following means-tested programs:
- Supplemental Security Income (SSI): Assistance to people who are 65 or over, blind, and/or disabled.
- Medicaid: Basic medical and hospital services for adults and children with disabilities. Some beneficiaries are also eligible for a Long-Term Care Medicaid Waiver, which provides coverage for long-term in-home care or assisted living services.
- Section 8, Housing Assistance, and Group Homes: Section 8 and other housing assistance programs provide financial help with renting an apartment for individuals below a certain income threshold. In some states, individuals may be eligible to live in a group home.
- SNAP: Financial aid to purchase food as well as seeds and plants to grow food, Meals on Wheels, and more.
- Veterans A&A: Aid for qualifying veterans and spouses of deceased veterans.
- CHIP: Health coverage to eligible children. The program is administered by states and is funded jointly by states and the federal government.
Another consideration is the value of the government programs’ benefits over the beneficiary’s anticipated life expectancy. Does it exceed the amount that a special needs trust would cost?
People with special needs may also be eligible for programs that are not means tested. These include Medicare, special education, and Social Security Disability Insurance (SSDI). By understanding exactly what an individual qualifies for, an expert planner can determine whether the settlement will impact his or her eligibility. If so, a special needs trust might helpful. There are also alternatives to a first-person special needs trust, such as:
- Spend down plan, which refers to a process of spending excess income on medical bills to avoiding incurring excess income that disqualifies a person from means-tested programs.
- Settlement protection trust, which would be helpful to those who are under age 18 or incapacitated. While it would impact eligibility for needs-based government programs, this kind of trust offers expert assistance with money management.
- Pooled trust, which is sponsored by a state- or nationally-based charitable organization and is administered by the charity and most likely an administrative trustee. The assets are “pooled,” and are helpful for smaller settlements.
- ABLE account, which gives beneficiaries and their families control over their funds. The cost of establishing an ABLE account will likely be less than that of a special needs trust or pooled income trust.
After reviewing the entire picture of a beneficiary’s financial life, an expert settlement planner can help determine if a special needs trust is the most helpful option, and if not, which tools would be the best for ensuring the settlement is as helpful to the client for as long as possible.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).