A TEN-STEP ANALYSIS TO MINIMIZE THE IMPACT OF A PERSONAL INJURY SETTLEMENT ON A PLAINTIFF RECEIVING PUBLIC BENEFITS
by: Begley Law Group
by Thomas D. Begley, Jr., Esquire, CELA
Many public benefits are means-tested and the receipt of a personal injury settlement will frequently disqualify the plaintiff from continuing to receive those public benefits. There are many public benefits, but the most commons ones are SSI, Medicaid, SSDI, Medicare, Section 8 House, SNAP (Food Stamps), and Veterans Aid and Attendance. SSI is an income payable to the recipient. For 2019, the maximum amount is $771 from the federal government, and a state supplement of $31.25. Medicaid provides medical services. Basic Medicaid includes basic services such as doctors and hospitals. Medicaid Waiver Programs include home care, assisted living, and nursing home care. There are other Medicaid Waiver Programs, such as the TBI Program, which provide extensive additional benefits. SSDI is a monthly income. The amount varies depending on the amount that the Plaintiff has paid into the system. Medicare provides basic medical services such as doctors and hospitals, but has deductibles, copayments, and maximums per spell of illness. Section 8 Housing is subsidized housing. SNAP is a food voucher program, and Aid and Attendance provides assistance to Veterans with disabilities who require home care, assisted living or nursing home care. SSI, Medicaid and most Medicaid Waiver Programs have a maximum resource limit of $2,000. SSDI, Medicare and Section 8 Housing, at this point, do not have resource limits. SNAP has a resource limit of $2,000, and Veterans Aid and Attendance has a resource limit of $126,420. So, receipt of a personal injury settlement would impact those programs that have a resource limit.
In addition, many of these programs have income limits. SSI, Medicaid and Section 8 Housing, SNAP, and Veterans Aid and Attendance have income limits. SDDI and Medicare do not.
SSI, Medicaid, Section 8 Housing, SNAP and Veterans Aid and Attendance have transfer of asset penalties. SSDI and Medicare do not. The lookback for transfers of assets varies from program to program.
Special Needs Trusts are almost always required when the plaintiff is receiving SSI and Medicaid, unless the settlement is large enough to warrant the plaintiff giving up these benefits. A Special Needs Trust is not necessary for SSDI and Medicare. It is not recognized by the Veterans Administration for Veterans Aid and Attendance. A Special Needs Trust can sometimes be useful in connection with Section 8 Housing and SNAP, but this needs to be analyzed on a case-by-case basis.
There are a number of steps that should be taken to determine the best course of action when a plaintiff receiving public benefits is going to receive a personal injury settlement.
Step 1: Determine what benefits the plaintiff is receiving. Plaintiffs frequently confuse SSI and SSDI, as well as Medicaid and Medicare. Good practice dictates that copies of the medical cards be obtained.
Step 2: Determine whether the plaintiff is disabled. Good practice dictates that copies of Disability Determination Letter from the Social Security Administration or the Veterans Administration be obtained. A plaintiff cannot benefit from a Self-Settled Special Needs Trust, unless the plaintiff has a disabled.
Step 3: Determine whether the plaintiff under age 65. A plaintiff cannot qualify for SSI, Medicaid, SSDI or Medicare under age 65 without a disability determination from the Social Security Administration. A plaintiff cannot benefit from a Self-Settled Special Needs Trust or a Pooled Trust in New Jersey, unless he or she is under age 65. If there is any question, obtain a copy of the plaintiff’s birth certificate.
Step 4: If it is determined that the plaintiff is receiving SSDI and Medicare, or will be eligible to receive Medicare within 30 months, then the plaintiff may receive the personal injury settlement and there will be no impact on SSDI and Medicare, but CMS may require a Medicare Set-Aside Arrangement..
Step 5: Determine whether it makes sense to give up Section 8 Housing. If the settlement is large enough, this benefit will no longer be of much value. If the settlement is more modest, consider transferring the personal injury settlement. There is a two year lookback for Section 8 Housing.
Step 6: Determine whether it makes sense to give up SNAP. If the settlement is large enough, this benefit will no longer be needed. If the settlement is more modest, consider transferring the personal injury settlement. There is a three month lookback for SNAP.
Step 7: If the settlement is very large, consider giving up SSI (approximately $800 per month between the federal benefit and the state supplement).
Step 8: If the settlement is very large, consider giving up Medicaid. The New Jersey Medicaid agency has become very difficult with Special Needs Trust distributions in the last year. By giving up Medicaid, this oversight can be eliminated. Private medical insurance can be obtained in the open market or through Obamacare. It should be noted that private medical insurance generally does not cover home care.
Step 9: Consider the following strategies that might be useful based on the size of the settlement. These strategies and the size the settlement will vary from plaintiff to plaintiff.
Size of Settlement Strategy
$100,000 or less Spend down
Retain benefits
$100,000 to $200,000 Pooled Trust
The plaintiff must be disabled and under age 65.
$200,000 to $500,000 Individual Special Needs Trust
The plaintiff must be disabled, under age 65, and any Structured Settlement must be payable directly to the Trust.
$500,000 and up Individual Special Needs Trust
The plaintiff must be disabled, under age 65, and any Structured Settlement must be payable directly to the Trust.
Plaintiff not disabled Structure with payment deferred.
This really only preserves Section 8 Housing and SNAP, and then only until the Structure payments begin.
Step 10: Consider a Settlement Protection Trust with Special Need Provisions when the beneficiary is under 18 and will be eligible for SSI and Medicaid at age 18. Also consider Trusts or Structures for minors and Trusts for incapacitated persons.