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| Milestone Consulting, LLC

About the Authors: Amy O’Hara, Esq. and Bernard A. Krooks, CELA are attorneys with LittmanKrooks, LLP.  Both O’Hara and Krooks focus their practices in the areas of estate planning, special needs planning, and elder law.  They are members of the Special Needs Alliance.  For more information, please visit

Established in 2011, the NYS Medical Indemnity Fund is used to pay the future medical costs of certain plaintiffs with birth-related neurological impairments in medical malpractice actions and is funded with the plaintiffs’ court-approved settlements or awards.  Some New York courts have questioned the need for special needs trusts now that the NYS Medical Indemnity Fund is available to plaintiffs.

A special needs trust (SNT) is a trust established for the benefit of a person with a disability, who in medical malpractice actions is generally the plaintiff.  The SNT is designed to supplement the trust beneficiary’s receipt of government benefits, such as SSI or Medicaid, rather than replace such benefits.  Federal and state law provide that a person with a disability who is under the age of 65 may place his or her own funds, including medical malpractice settlements, in a SNT without having the funds count towards Medicaid eligibility thresholds.  Such trusts must be irrevocable and provide that upon termination of the trust or the death of the trust beneficiary, all remaining trust assets must be paid back to Medicaid for all benefits expended on behalf of the trust beneficiary.  Thus, plaintiffs can receive personal injury settlements and awards without reducing their entitlements to government benefits.

If the requirements of the NYS Medical Indemnity Fund are triggered, an allocation of a medical malpractice settlement is made to this fund, leaving the balance of the settlement, including any structures, in the name of the plaintiff and sometimes in a court-supervised guardianship account.  If the balance of the settlement is not placed into an SNT, the plaintiff will be ineligible for Medicaid and other means-tested government benefits.

In New York State, Medicaid not only provides a form of medical coverage to individuals with disabilities but also provides access to many programs through the Office of People with Developmental Disabilities (OPWDD).  A sampling of the services offered by OPWDD includes access to intensive behavioral services, skills development, vocational training, community-based recreational programs, family support services, individualized case management provided by service coordinators, long-term rehabilitative services, respite services and residential housing.  Based on the severity of an individual’s developmental disability, he or she may require access to the aforementioned programs and services on a permanent basis.  The plaintiff is frequently best served by establishing and maintaining his Medicaid eligibility through the use of an SNT to afford him or her the opportunity to access highly specialized services that are not medical in nature and covered through the Medical Indemnity Fund.


Accordingly, placing the balance of the plaintiff’s personal injury settlement, including future structures, after the allocation to the Medical Indemnity Fund into a special needs trust will generally serve to enhance the plaintiff’s level of services, as he or she has the option of gaining access to what are often much-needed services and programs covered under the broad auspices of OPWDD.


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