by Thomas D. Begley, Jr., CELA


When a case is settled, the Personal Injury Attorney’s work is not necessarily complete. There are a number of issues that must be considered prior to closing the file. These decisions have a significant impact on the client’s future life and could result in legal malpractice claims against the Personal Injury Attorney, if not adequately addressed. These issues include the following:

• Allocation of settlement proceeds
• Is a Special Needs Trust required?
• Is a Settlement Preservation Trust appropriate?
• Is a Medicare Set-Aside required?
• Are all Liens satisfied?
• Can any Liens be negotiated?
• Is a Structured Settlement appropriate?
• Is the client receiving good investment management advice?
• If there is a trust, is there a professional trustee?
• Income and estate tax issues
• Estate planning documents
• Medical insurance

This is the first of a series of articles that will discuss these and other issues pertaining to finalizing a personal injury settlement.

Special Needs Trust. It is important to make a determination as to whether a Special Needs Trust is required. If the Plaintiff is receiving means-tested public benefits, a Special Needs Trust will preserve those benefits. The settlement proceeds can be deposited into the trust and will not be counted as assets for public benefit purposes. In determining whether a Special Needs Trust is required, the Personal Injury Attorney should ask the following questions:

• Is the plaintiff a “disabled person” within the meaning of the Social Security Act?
• Has the person received a Disability Determination by the Social Security Administration or the State Medicaid Agency?
• Has the person or could the person apply for a Determination of Disability by the Social Security Administration?
• Is the disabled person receiving or likely to receive any of the following means-tested public benefits?

  • SSI
  • Medicaid
  • Medicaid Waiver Program
  • Section 8 Housing
  • SNAP (Food Stamps)
  • Veterans Benefits
  • Group Home
  • Psychiatric Institutionalization

NOTE: A Special Needs Trust is not required if the plaintiff is receiving SSDI and/or Medicare

A person receiving a personal injury settlement needs to do a Self-Settled Trust as opposed to a
Third Party Special Needs Trust. There are six requirements for a Self-Settled Special Needs
Trust. These are:

• Assets of the individual – The trust must be funded from the assets of the individual. A personal injury settlement constitutes the asset of the individual who is the beneficiary of the trust.

• Under Age 65 – A Self-Settled Special Needs Trust cannot be utilized if the plaintiff has reached his 65th birthday.

• Disabled – The person must have received a disability determination by the Social Security Administration or the State Medicaid Agency. While waiting for such a determination, it may be appropriate to fund a trust based on a letter from a physician or an attorney specializing in Social Security Disability appeals that the individual meets the Social Security definition of disability.

• “Sole Benefit of” Such Individual – Social Security has interpreted this language to mean that the trust must be for the “Sole Benefit Of” the disabled plaintiff. This means that the trust cannot serve as the family bank account. Other family members benefiting from the trust much pay their pro rata share.

• Established By – The trust must be established by parent, grandparent, guardian or court. For a pooled trust, the trust cannot be established by the disabled plaintiff. Payback on the death of the disabled individual or up on the early termination of the trust during the beneficiaries lifetime, Medicaid must be repaid for all Medical Assistance provided on behalf of the individual.