What Should You Do With a Personal Injury Settlement Received on Behalf of an Incapacitated Relative?
Posted on: 21 February 2017
If your elderly parent is incapacitated so that an inpatient nursing home is the only option for his or her continued care, he or she may already be receiving Medicaid benefits to pay for this care. While receiving a settlement or judgment from the defendant can be a relief, for those dependent upon Medicaid for their care, these types of windfalls can often cause more problems than they solve.
Read on to learn more about how special needs trusts (SNTs) can help preserve funds from a personal injury settlement to allow your relative to qualify for care while still providing the money for extras and needs above and beyond what may be provided by a nursing facility.
What can be the impact of receiving settlement or judgment funds for someone receiving skilled nursing care?
Medicare won't pay for many types of inpatient skilled nursing care. Thus, in order to be admitted into a nursing home or other facility, residents will need to pay the private pay rate until they've exhausted their assets, then turn to Medicaid to continue payment. Once assets have been spent on nursing care, this will often leave little money for extras like toiletries, over-the-counter medication, new clothes, and other expenses that aren't covered by Medicaid. These extras may not be sufficiently covered even with Social Security.
A personal injury settlement or judgment can replenish these funds for Medicaid patients, but because this will usually take one's assets above the maximum limit for Medicaid eligibility, this can mean booting your relative off the Medicaid rolls until these settlement funds are also exhausted. This often leaves your relative physically and financially worse off than he or she was before the injury.
Protecting these settlement funds in a trust that keeps them out of your relative's legal ownership while still allowing him or her to derive the benefits intended from these funds can be an ideal solution to allow your disabled elderly relative to live in comfort for the rest of his or her life.
How can a special needs trust be used to avoid the implications of a lump sum windfall?
A special needs trust is a specific type of trust designed for those who are disabled and receiving Medicaid benefits. By establishing this trust and directing that the personal injury settlement or judgment proceeds be paid to the trust (rather than to your relative directly), you'll ensure that these funds are never able to disqualify your relative from continued Medicaid benefits. A trustee is then appointed to administer these funds on your relative's behalf and for his or her direct benefit. You may opt to be the trustee of this trust yourself, or appoint another trusted friend, family member, or legal adviser to serve in this role.
Another alternative in situations where the settlement or judgment is too small to justify the establishment of a trust is to purchase an annuity that will provide your relative with a steady monthly income for a set period. By immediately converting a liquid settlement into annuity form, you'll ensure your relative's assets remain below the Medicaid limits while still ensuring your relative can benefit from these funds on a regular basis.
You may want to purchase an extended annuity or pre-plan larger purchases to ensure the balance in your relative's checking account stays at a certain minimum level, as letting these funds build up in the account unspent could inadvertently cause your relative to run afoul of the asset limits.
To learn more about your options, contact local law services such as Burke Schultz Harman & Jenkinson Attorneys at Law.
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