THE INTERACTION BETWEEN A PERSONAL INJURY ATTORNEY AND AN ELDER & DISABILITY LAW ATTORNEY

by Thomas D. Begley, Jr., Esquire, CELA

[Article originally published in The Barrister] In settling a personal injury case, a number of issues arise where an Elder and Disability Law Attorney may be useful to the Personal Injury attorney.  Frequently, the Elder and Disability Law Attorney works with Corporate Trustees, Structured Settlement Brokers, Financial Advisors, Care Managers, Lien Resolution Specialists, Matrimonial Attorneys, and firms that calculate Medicare Set-Aside Arrangements.

What should Personal Injury Attorneys think about when a case is being settled?

• Liens.  Does the case include any of the following liens:  Medicaid, Medicare, Medicare Advantage, Medicare Part D, ERISA, Federal Employees Health Benefits Act (FEHBA), Federal Medical Care Recovery Act (FMCRA), Veterans Administration Claims, Tricare Claims, Welfare Liens, Violent Crimes Compensation Liens, State Worker’s Compensation Liens, Federal Employee Compensation Act (FECA), Hospital Liens, Child Support, State Division of Mental Health, or New Jersey Division of Developmental Disabilities (DDD)?  In many instances, a Lien Specialist can assist in obtaining the initial payoff and in negotiating a settlement of a lien. Significant savings can be achieved for the client when this is done.

• Special Needs Trust. Is a Special Needs Trust required?  There are a number of means-tested public benefits, such as SSI, Medicaid, Section 8 Housing, SNAP (Food Stamps), Veteran’s Aid & Attendance, and others, that have asset tests.  If the individual receives a personal injury settlement, that money is considered an asset and often disqualifies the plaintiff from important means-tested public benefits. Having said that, there are a number of pathways to Medicaid.  Some of these have resource limits of typically $2,000; others do not have asset limits.  For example, an SSI recipient automatically receives Medicaid.  There is a $2,000 resource limit.  Community Medicaid, CRPD, Nursing Home Medicaid, and MLTSS, which pays for home care and assisted living, all have $2,000 resource limits. New Jersey Workability has a $20,000 resource limit.  New Jersey Family Care and the Children’s Health Insurance Program (CHIP) have income limits, but do not have asset limits.  New Jersey Workability also has an income limit.  Eligibility for a Medicaid program with a resource limit can be maintained by utilizing Special Needs Trusts.  

Special Needs Trusts have certain requirements:  

• Assets of the Individual.  The trust must be funded with assets of the individual, which would be the personal injury settlement.  
• Under Age 65.  The individual must be under age 65.
• Disabled.  The individual must be disabled as determined by the Social Security Administration.
• Sole Benefit Of.  The distributions from the trust must be for the sole benefit of the individual.
• Established By.  The trust must be established by the individual, a parent or grandparent, a guardian or the court.  
• Payback.  On the death of the beneficiary of the trust, Medicaid must be paid back all monies expended on behalf of the individual from birth, including any amount by which the Medicaid lien against the settlement was reduced.  For example, if there was a $100,000 lien against the settlement and the Personal Injury Attorney negotiated a reduction to $60,000, the remaining $40,000 would have to be paid from the Special Needs Trust on the death of the plaintiff.

• Settlement Protection Trust.  Is a Settlement Protection Trust necessary or advisable? A Settlement Protection Trust is much more flexible than a Special Needs Trust.  If the plaintiff is a minor or incapacitated person, a Settlement Protection Trust is a much better option than leaving the money with the Surrogate. It is much easier and cheaper to get distributions when needed.  If the plaintiff is unsophisticated, a Settlement Protection Trust often makes sense, even if they are an adult with capacity.  Monies deposited in the Settlement Protection Trust can be administered by a Trustee who will give guidance to the plaintiff, so that the money is not squandered.  The Trustee can also help with investments.

• Bankruptcy.  Has the plaintiff ever been bankrupt?  If so, has the plaintiff been discharged?  If the injury occurred prior to or within six months after the bankruptcy petition filing date, the injury claim is subject to bankruptcy.

• Wrongful Death Case.  In a wrongful death case, there is a deceased plaintiff. Probate will be necessary.  Did the plaintiff leave a Will?  If so, the Executor can handle the estate.  If not, an Administrator must be appointed to handle the estate.  Remember, an Administrator Ad Pros can file a lawsuit, but cannot settlement the claim. This must be done by the Executor or Administrator.

• Estate Planning – Plaintiff.  Frequently, plaintiffs had little in the way of assets and did not feel the need for a Will.  After the personal injury recovery, the plaintiff should consider a Will and/or Living Trust, an Advance Directive, and a Power of Attorney.

• Estate Planning – Family.  Do the parents of a plaintiff need Estate Planning involving a Will, Living Trust, Advance Directive, Power of Attorney and, perhaps, a Third Party Special Needs Trust?  If the plaintiff is receiving means-tested public benefits and a parent dies leaving the plaintiff an inheritance, the inheritance can disqualify the plaintiff from those important benefits.  By establishing a Third Party Special Needs Trust and a Will, this can be avoided.

• Medicare Set-Aside Arrangement (MSA).  Should an MSA be considered?

• Guardianship.  If the plaintiff is an incapacitated adult or a minor, is a guardianship necessary?  If so, is a guardianship of the person sufficient, or must there be a guardianship of the property?  Would a limited guardianship suffice?

• Qualified Settlement Funds (QSFs) – Plaintiff. Would a QSF be helpful?  The purpose of these funds is to permit a defendant, in certain types of litigation, to deposit funds into a trust and to receive a full and complete release of liability.  The defendant is entitled to a current income tax deduction for the amount paid into the fund at the time the funds are deposited into the trust. QSFs arose out of class action lawsuits. They can be very useful in personal injury actions involving multiple plaintiffs.  The parties agree to a global settlement.  The plaintiffs can then take their time allocating the settlement among themselves and dealing with various liens.  

• Structured Settlement.  A Structured Settlement is an Annuity that pays the injured plaintiff a series of periodic payments over time, rather than a single lump sum. The income component of a payment under a Structured Settlement Annuity made to compensate for physical injuries or physical sickness is not taxable. The Structured Settlement prevents unsophisticated plaintiffs from squandering the funds.  The Structure can be used in combination with a Special Needs Trust to maintain public benefits.  The Structured Settlement is free from claims of the injured party’s creditors until receipt. The Structure can be used as the income component of an investment portfolio.  In many cases, the injured plaintiff will have a rated age, which means that the payout from the Structured Settlement can be considerably higher.

• Professional Trustee.  A professional Trustee should always be considered.  Family members serving as Trustees are usually, but not always, well intentioned.  Even the well intentioned family members make serious mistakes.