Application of The Special Needs Trust in Personal Injury Cases for Disabled Individuals Under Age 65
Of the many obstacles that may hinder settling a personal injury suit, and certainly a potential area of professional negligence, is the loss of entitlement benefits SSI, Medicaid, AFDC, etc) following a settlement. This occurs if the recipient obtains assets and/or income that exceed the statutory qualification thresholds (usually $2000). In the exceptional case where the award is significantly greater than the lifetime value of the entitlement benefits, the loss of those benefits may be of little consequence. However, in many settlements, benefit termination economically disadvantages the injured party and may produce a worse financial situation than prior to settlement. Under this scenario, the injured party must first exhaust the awarded funds before reapplying for entitlement benefits. During that period of time, they have no income and risk tougher scrutiny as they attempt to re-qualify for benefits.
Even a large award may inadequately replace terminated entitlement benefits, depending on the life expectancy and medical condition of an injured party. When the disabling injury occurs to a minor, entitlement benefits may not be available due to the combined assets of their family. However, a Special Needs Trust may still be appropriate as the child can become eligible independent of his/her family at age 18.
The ARC of Texas (Master Pooled Trust) is now available for those smaller settlements that cannot justify the cost of an individual Special Needs Trust. Otherwise, an appropriate Special Needs Trust must be drafted by legal counsel to comply with the Omnibus Reconciliation Act of 1993 [revised 42 U.S.C. 1396 p(d)(4)] and approved by the court as part of the settlement agreement or release. As part of the trust agreement, the injured party may not own or have direct access to the trust fund, and the trust must be irrevocable. Trust funds may not be used to provide for rent, clothing, or food, but only for expenses not covered by entitlement benefits. The injured party cannot be the grantor or settlor of the trust; trustee and successor trustees must be other than the injured party; and trustees have absolute discretion regarding the disbursement of funds for supplementary needs. Often, an additional benefit of the properly drafted trust is the protection of assets within the trust from creditors.
Settlement Partners coordinates the process, brokers annuity and bond programs, assists with post-settlement management, and provides highly specialized guidance to attorneys and their clients.