Question: Several years ago, my husband was seriously injured in an auto accident caused by another driver. He could no longer work and we were able to obtain Medicaid which covered the enormous medical bills and home care he needed. Now the lawsuit we brought against the other driver is about to settle and I heard that the money we receive will make us ineligible for Medicaid to cover my husband’s on-going medical and home care needs. These expenses can easily eat up the settlement that we have counted on for so long. This hardly seems fair. Is there anything we can do?
First, let me say that you are fortunate that you are asking this question before you receive the settlement. If no action is taken, receipt of these funds can make one ineligible for public benefits. In such a situation, you would be, in essence, suing only for the benefit of the State. I am certain that is not your intention.
Unfortunately, this situation is not uncommon. Recently, a client came into our office who had not asked the question you are asking. Quite a number of years ago, after suffering devastating injuries he sued the party at fault. He had an excellent personal injury attorney who obtained a large verdict for this client. However, as is often the case, this attorney knew nothing of elder law or public benefits law nor had the presence of mind to consult one of the few elder law attorneys in the area. At the time, the client was very happy with the amount he received and was not overly concerned that he lost Medicaid. Now, many years later, he is running out of money, a good percentage of which was spent on medical care which otherwise would have been paid by Medicaid.
What could have been done for this client at the time he received the funds (and is still some benefit to him now), is that an attorney with appropriate expertise should have drafted a Supplemental Needs Trust to hold the funds. Such a Trust is specifically authorized by statute to hold assets which will "supplement and not supplant" public benefits. In other words, you can have the use of this money and still keep your Medicaid. In the case of our reader, his wife or a trusted family member would most likely be the trustee and utilize the funds for the benefit of the husband. In this way, the husband would have use of the settlement monies and not face the prospect of the majority of the funds going for medical expenses. This is exactly the intent of the law.
Another important point regarding the settlement and the use of a Supplemental Needs Trust is that it should be requested that the judge orders that the settlement funds be placed in such a Trust. Having this included in a Court Order makes it much easier to pass muster with agencies such as Social Security Administration which often scrutinizes Supplemental Needs Trusts very carefully.
The other major use of the Supplemental Needs Trust is in estate planning. Parents would not choose to leave money through their Wills to a disabled child which would only serve to deprive the child of public benefits. Therefore, they first have a Supplemental Needs Trust drafted and then leave money through their Will to the Supplemental Needs Trust for their child.
One final point regarding settlement of a law suit for a plaintiff who has been receiving public benefits is that some of these benefits may have to be paid back to the government before a case can be settled. In most cases, these amounts can be negotiated down by your attorney. However, it is vital that the negotiations take place before settlement is reached. I was once contacted by a personal injury attorney (not, of course, from this area) who asked me if I could intervene on his client’s behalf in negotiating a lien with the Department of Social Services with whom he knew I had a long-standing relationship. Unfortunately, final settlement had already been reached and DSS was prohibited from compromising its claim. This makes sense since then-only motivation to take less money is if they think it will help settle the case which will, in turn, bring them reimbursement more quickly. Once settled - no motivation.
In short, if these two items are taken care of prior to settlement - negotiating governmental claims for reimbursement and formation of a Supplemental Needs Trust to hold the settlement proceeds - you will be in a much better position to receive the settlement that you really deserve.