MY CLIENT IS A MEDICAID RECIPIENT RECEIVING A PERSONAL INJURY SETTLEMENT, DOES HE NEED A SPECIAL NEEDS TRUST?
by: Begley Law Group
by Thomas D. Begley, Jr., Esquire, CELA & Emily M. Schurr, Esquire
GENERAL
As a personal injury attorney, an important source of insurance and funding for medical needs for your clients with disabilities is Medicaid. When a person is receiving Medicaid and may be receiving a settlement, it must be determined whether a Special Needs Trust (SNT) is required to protect eligibility. Whether an SNT is needed depends on the Medicaid program involved. There are a number of pathways to Medicaid. If the individual’s Medicaid is means-tested, an SNT is required. If the Medicaid program is only income-tested, an SNT is not required. Begley Law Group can determine under which program your client is receiving benefits.
SSI/MEDICAID
An individual receiving Supplemental Security Income (SSI) receives basic medical services (e.g. doctors, hospitals, prescription drugs) through Medicaid, but no long-term care (LTC). The applicant for SSI must be disabled, blind, or at least 65 years of age. The maximum federal SSI benefit is $967 per month in 2025, plus a New Jersey State Supplement of $31.25, for a total of $998.25.
There is an income test. After a $20 disregard, unearned income reduces the SSI payment dollar-for-dollar. This means that if the individual’s outside unearned income is more than $987 per month, he or she would not be eligible for SSI. For earned income there is an $85 disregard and then one-half of the earned income reduces SSI dollar-for-dollar. Income of a parent is deemed to a minor child. There is also an asset limit of $2,000. There is a transfer of asset penalty for SSI with a lookback period of three years.
If the plaintiff’s Medicaid is linked to SSI, a Special Needs Trust is required to maintain eligibility. Alternatively, a Spend Down Plan may be an option.
It is important to remember that because of parental deeming of income and assets, an individual may not be currently receiving SSI but may become eligible for SSI at age 18. In those cases, the individual will also receive Medicaid at age 18, so it is important to look ahead. In those cases, an SNT would be required.
NEW JERSEY FAMILYCARE
This Medicaid program under the Affordable Care Act (ACA) provides basic medical insurance for adults age 19-64, as well as children under age 19. There is no requirement for an individual to have a disability. Financial eligibility is based only upon income. Adults age 19-64 may have income up to 138% of the Federal Poverty Level (FPL). Children under age 19 may be eligible with household income up to 355% of FPL under the Children’s Health Insurance Program (CHIP). The income limit varies based on household size. For example, an adult in a household of one will be eligible if income is below $1,800 per month in 2025. Under the CHIP program, a child in a household of four will be eligible if household income is below $9,512 per month in 2025. There is no asset limit. An SNT is not required to maintain eligibility under this program if a personal injury settlement is received. NOTE: A Settlement Protection Trust should be considered for management purposes, especially if the individual receiving the personal injury settlement is a minor.
NEW JERSEY WORKABILITY
New Jersey WorkAbility provides basic medical services. The individual must be over age 16. The individual applicant must be disabled, but able to work. Disability must be determined by Social Security or the Disability Review Team at the New Jersey Division of Medical Assistance and Health Services (DMAHS). The individual must work full-time or part-time, or be self-employed and have proof of employment. If the individual has income above 250% of the FPL, he or she must pay a premium. If the individual has income at or below 250% of the FPL, no premium is due. Effective April 1, 2023, there is no asset limit for WorkAbility. A Special Needs Trust is not needed to maintain eligibility for this benefit, but may be advantageous if the person may need additional care in the future.
MANAGED LONG-TERM CARE SERVICES & SUPPORTS (MLTSS)
Managed Long-Term Care Services & Supports (MLTSS) is a Medicaid program which provides basic medical services plus LTC including nursing home, assisted living, and home care. The applicant must be meet medical eligibility standards. New Jersey has an income limit of 300% of FPL, which is $2,901 per month in 2025. In New Jersey, the individual can establish an Irrevocable Qualified Income Trust (QIT), also known as a Miller Trust, and direct any excess income into that trust to become income eligible. The asset limit is $2,000. There is a transfer of asset penalty, and the penalty is calculated by dividing the uncompensated value of the amount transferred by a state divisor. An SNT is required to maintain this benefit, if there is a personal injury recovery or receipt of assets over the asset limit.
PERSONAL PREFERENCE PROGRAM (PPP)
The Personal Preference Program is a New Jersey Medicaid program which provides a monthly budget from Medicaid to employ parents, spouses, friends, relatives, or neighbors as the individual’s personal caregivers, instead of using a home health care agency. The budget is based on the number of authorized Personal Care Assistant (PCA) Services hours authorized multiplied by the current reimbursement rate for 2025, which ranges from $31 to $47 per hour with an average of $35 per hour. The program is designed to create autonomy and flexibility for individuals who need home health aides and have loved ones serving as caregivers. The applicant must meet medical eligibility standards. Adults age 19-64 are eligible with income up to 138% FPL. Individuals eligible for the Aged, Blind, Disabled (ABD) Medicaid programs, including MLTSS, are also eligible for PPP.
REQUIREMENTS OF A SELF-SETTLED SPECIAL NEEDS TRUST
- Assets of the Individual. The trust must be funded with assets owned by the individual, such as litigation proceeds.
- The individual must be under 65 years of age at the time the trust is funded.
- The individual must be disabled as defined in the Social Security Act.
- The trust must be for the benefit of the individual with disabilities.
- The trust must be established by the individual, a parent, grandparent, guardian or the court.
- The State Medicaid Agency must be reimbursed upon the death of the beneficiary.
Additionally, the trust must be irrevocable (i.e. permanent), and it must give the trustee discretionary authority to make distributions.