Special Needs Trusts – Settling Cases for SSI/Mediciad Beneficiaries

Recipients of need based government benefits require special consideration when receiving settlements in personal injury cases. A sudden influx of cash will leave a Medicaid/SSI recipient ineligible for benefits, resulting in a quick evaporation of their settlement funds as medical treatments and services previously paid by the state are now paid directly from the client’s pocket. However, a Special  Needs Trust (AKA Supplemental Needs Trust) can be a Medicaid beneficiary’s best friend, avoiding the scenario described above. Funds placed into a Special Needs Trust are not countable assets for government benefit eligibility. Thus, a client may place their settlement funds into a Special Needs Trust, and maintain government benefits. Trust funds may be used for extra services and luxuries not provided for by Mediciad and SSI. Trust funds may NOT be used for food, shelter, property taxes, fuel, or utilities.

For an individual to be eligible for a special needs trust in Florida, they must be under 65 years old and disabled as defined in as defined in section 1614(a)(3) of the Social Security Act. For clients over the age of 65, a Pooled Trust under 42 USC 1396p(d)(4)(c) is an appropriate. Here, we will address trusts for individuals under 65 funded through a personal injury settlement. In considering whether a client is disabled, the Social Security Act informs us that disabled means “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.” Fortunately, this determination has already been made is most cases. Any client receiving SSI benefits in Florida has been determined as disabled under this definition.

Once it has been determined that a client is eligible, a trustee must be selected. Typically a family member will fill this role, however a professional trustee should be utilized when there is not a friend or family member who can be counted on to diligently and responsibly administer the trust. It must me imparted to the trustee that spending trust funds on ineligible expenses will jeopardize all trust assets. Upon the death of the client/settlor, Medicaid will hold a lien over trust assets for the amount expended by Medicaid on services for the settlor during their lifetime. The amount of this lien will be far less than the settlor would have paid for the same medical services out of pocket, as Medicaid receives an approximate 40% discount on medical bills relative to an individual consumer.

The primary tenants of a “self settled” injury settlement Special Needs Trust are as follows:

  1. The trust is designed as a special needs trust pursuant to 42 U.S.C. Sec. 1396p (d)(4)(a) and that it is for a disabled person under age 65.
  2. That the intent of the settlor is to allow eligibility for ongoing public assistance including SSI or Medicaid.
  3. That the intent is to “supplement” and not “supplant” public benefits.
  4. That distributions may be made in the trustee’s sole discretion for maintaining the quality of the beneficiary’s health, education, safety and welfare when they are not being provided by ongoing public assistance.
  5. That the trustee will repay all state Medicaid bills upon termination of the trust provided they may pay other estate expenses first.

Florida Probate Law Group has experience establishing Special Needs Trusts for Medicaid beneficiaries to protect settlement proceeds. We work statewide supporting plaintiffs firms in probate, guardianship, special needs planning, and lien defense. Call 352-354-2654 or email cdavid@circuit8law.com if you have questions about an issue affecting a settlement.