By Anne R. Moses.
When you represent an injured plaintiff, thinking about estate planning of family members is probably not on your mind, but it should be. If your plaintiff is going to qualify for Supplemental Security Income (SSI) and Medicaid, now or down the road, you need to have the family be aware of what can destroy the Plaintiff’s eligibility.
Spouses, grand parents, siblings, aunts, uncles and friends often want to help provide for the plaintiff and often revise their Wills to provide outright monetary gifts to the injured person, or they may establish a trust for his/her benefit. You should warn the family and have them warn friends that they will be doing damage to the plaintiff’s right to government benefits unless they provide for gifts in the correct way.
Also by Anne Moses: Protecting the PI Recovery for the Victim
Eligibility for SSI and Medicaid is predicated on need. Outright gifts are treated as gifts of income in the month received. In 2016 an individual cannot receive more than $733 in income in a month. If anything is left, the balance is treated as a resource. Because the resource can be used to support the individual, he or she will be ineligible to receive benefits until the balance is spent. A new application must then be made for benefits. Depending on the amount involved this can result in disqualification for the first month and numerous months thereafter.
If a trust is created for the benefit of the plaintiff, the trust must not provide for the individual’s support or it too will result in a disqualification for benefits. For many people running out of money is not as important as losing Medicaid benefits.
Special Needs Trust
The family (or friends) should establish a supplemental special needs trust, also known as a third party special needs trust (SNT). The trust will be drafted in such a way that it will not provide for support, which will then allow the injured person to continue qualifying for SSI and Medicaid. If the family establishes the trust, other family members and friends can make donations to it.
An SNT is not a support trust. It supplements the needs of the individual. The individual pays for rent and food out of his/her SSI benefits. Distributions from the SNT can provide for everything else, including
- Unreimbursed medications or other medical expenses
- A car
- Special equipment
- Modifying a home for personal use.
One of the more significant benefits is that, unlike a first party SNT (created with the plaintiff’s own money), on the plaintiff’s death, the remaining assets are not paid to Medicaid for services provided; but are distributed to the beneficiaries named in the SNT. This can be an encouragement for a family and friends to make gifts.
As this is an area of law which litigators are not generally familiar with, it may help to provide a pamphlet to the family to warn them of the need to provide carefully for the plaintiff. This can be prepared by a qualified elder lawyer.
Sample pamphlets are available by contacting [email protected].