by: Begley Law Group

by Thomas D. Begley, Jr., CELA


            Many plaintiffs in personal injury actions are receiving means-tested public benefits such as Supplemental Security Income (SSI), Medicaid, Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps), Federally-Assisted Housing, Adoption Assistance, Temporary Assistance for Needy Families (TANF), and Low-Income Home Energy Assistance Program (LIHEAP).  These benefits are means-tested.  Typically, the recipient of the public benefit cannot have more than $2,000 of assets in order to be eligible to receive these benefits.  In 1993, Congress authorized the establishment of Self-Settled Special Needs Trusts.  The personal injury victim can transfer the personal injury recovery to a Self-Settled Special Needs Trust, and the funds in the trust would not be counted as assets of the beneficiary.  However, one of the requirements in the statute is that the beneficiary be under age 65.


In the same legislation, Congress authorized the establishment of Pooled Trusts.  Pooled Trusts are established and administered by non-profit disability organizations.  Again, the assets held in the Pooled Trust are not considered available resources to the beneficiary.  However, in New Jersey, if assets are transferred to a Pooled Trust the State Medicaid Agency imposes a transfer of asset penalty.


What Are the Options for a Personal Injury Plaintiff Age 65 or Older?


  • Accept the Money. One option for the personal injury victim is to accept the money and use it to improve the quality of care to a level above what Medicaid would provide.  However, if the individual is residing in a facility, such as an assisted living facility or a nursing home, there is often little that can be done to improve quality of life other than to hire an aide.


  • Spend Down. The personal injury victim can spend down the money, so long as the spend down is for goods and services that benefit the plaintiff.  Purchase of goods and services to benefit friends or family members constitutes a gift and is subject to a Medicaid transfer of asset penalty.  The types of things that money can be spent down on include the purchase of a home, home improvements, repairs and maintenance, installation of burglar alarms, monitoring or response systems, entertainment, a motor vehicle, household goods and personal effects, payment of taxes and debts, and payment of a prepaid funeral and even a vacation.


  • Transfer of Funds. If the personal injury recovery is substantial and the cost of care is relatively modest, such as home care on a limited basis, it may make sense for the plaintiff to transfer the recovery to a family member, friend, or even a trust.  The transfer would invoke a five-year lookback for Medicaid eligibility, but this may still make sense.  The Personal Injury attorney should work with an experienced Elder and Disability Law Attorney to explore this possibility.


  • ABLE Account. If the personal injury plaintiff was disabled prior to age 26, an ABLE account could be established.  Fourteen thousand dollars per year could be placed in the ABLE account.  Up to $100,000 can be accumulated in the ABLE account without affecting the plaintiff’s SSI payment or Medicaid eligibility.  The plaintiff has a certain amount of control over this account, so long as distributions are made for qualified disability expenses.  The definition of qualified disability expenses is fairly broad.


  • Long-Term Care Planning. The personal injury plaintiff could engage in traditional long-term care planning.  This is complex, but to oversimplify long-term care planning would involve:


  • Protections for Community Spouse.If there is a community spouse, he or she is entitled to a Community Spouse Resource Allowance totaling one-half of the couple’s countable assets not to exceed a total of $130,380.  In addition, the community spouse is guaranteed a minimum monthly income.  If a spouse’s income is less than the federal threshold, part of the income of the institutionalized spouse may be able to be allocated to the community spouse.


  • Spend Down.Part of the planning may involve spend down for the institutionalized spouse.  There may also be spend down that is appropriate for the community spouse.  Spend down might include home improvements, purchase of personal effects and household goods, automobile, prepaid funerals, and many other items.


  • Transfer of Asset Planning.Depending on the size of the personal injury recovery and the personal injury plaintiff’s other assets, it may be possible to transfer assets to certain trusts or to individuals such as children or grandchildren.  While there are lookback and penalty considerations, this is often a good strategy for many potential clients.


  • If the personal injury plaintiff is married, he could receive the settlement and transfer it to his community spouse.  Transfers to community spouses are not subject to Medicaid transfer of asset penalties.  The community spouse could then purchase a Medicaid-compliant annuity.  The payee of the annuity would be the community spouse, so the personal injury settlement would not be considered an asset; it would be considered income of the community spouse and such income is not counted.  The annuity must be irrevocable, non-assignable, actuarially sound as determined by publications of the Office of the Chief Actuary of the Social Security Administration, and must provide for payments in equal amounts during the term of the annuity with no deferral and no balloon.  The State Medicaid Agency must be named as remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the annuitant or the annuitant’s spouse.  The State may be named as beneficiary in the second position, if there are minor or disabled children who are named in the primary position.


  • Non-Penalized Transfers. The personal injury plaintiff could buy a home and transfer to his or her spouse, a child under age 21 or blind or permanently disabled, the individual’s child who has resided in the home for at least two years immediately prior to the date the individual becomes institutionalized, and who provides a level of care sufficient to permit the individual to reside in the home rather than an institution.  The personal injury plaintiff might also transfer the settlement to his or her child who is blind or permanently and totally disabled, or to a trust established solely for the benefit of any individual under age 65 who is disabled.  This would include not only children, but grandchildren or even non-family members.  Special trust rules apply in this situation.


In conclusion, while planning for a personal injury plaintiff age 65 or older is more complex because a Self-Settled Special Needs Trust is not an available tool to avoid a transfer of asset penalty, there are many other options that can be used in appropriate circumstances.