An educational seminar provided by:

An Overview of Special Needs Settlement Planning

A presentation for the Academy of Special Needs Planners

An Overview of Special Needs Settlement Planning

A presentation for the Academy of Special Needs Planners

12900 Hall Rd., Suite 470 ▪ Sterling Heights, MI 48313Phone: 586-803-8500 ▪ Fax: 586-803-8508

Email: michele@michiganlawcenter.comwww.MichiganLawCenter.com

• Helps recipients of settlement proceeds: • Achieve their post-loss goals• Transition successfully into their

post-settlement financial lives

• Assist litigatorsto finalize settlements

What Is Settlement Planning?

Settlement Planning

Working with litigators to:

• Set Client

Expectations

• Preparing Motions

& Orders

• Settlement

approval

• MSPA Issues

• Appear as GAL

• Probate issues

• Guardianships

• Conservatorshi

ps• Protective

Orders

• Decedent

Estates

• Settlements

• Trusts

Settlement Planning

Working with the settlement team to execute a plan

that includes:

• Lien Resolution

/ Repayment

• Special Needs

Planning

• Coordination of

Benefits

• Estate Planning

• Financial

Planning

• Tax Planning

Why Special Needs Planning?

• Planning for the future finances, care, advocacy, and protection for a person with a disability

• Issues that generally arise concern:• Lifetime financial and personal care• Understanding what public benefits used to

meet current and future care needs• Maintaining the ongoing care• Addressing unmet needs

• Medical • Personal

Work With aSettlement Planning Team

• No single professional can address all of the issues

• At a minimum, the following experts should be consulted:• Special Needs/Estate Planning Attorney • Financial Lien Resolution Attorney • Structured Settlement Broker• Medicare Set-Aside Specialist • Certified Public Accountant or

Enrolled Agent• Financial Planner• Other (Life Care Planner / Case Manager)

Working as a Team

• Provides a very real and long lasting benefit for Plaintiffs

• Start Working Together Early• Sets Appropriate Expectations for Plaintiffs• Saves Time for all Professionals• Credibility for Plaintiff’s Attorney

• Better Overall Service• Financial, Tax, and Legal professionals

working together can provide a comprehensive plan

• Avoids mistakes

When to Involve Special-Needs Settlement Planning Professionals

Date

of Los

s / I

njur

y

Reta

in Law

yer /

File S

uit

Trial/A

rbitr

ation/

Settl

emen

t

Reso

lutio

n

Poss

ible Q

ualifi

ed S

ettle

men

t Fun

d Lien

Res

olut

ion

Distrib

ution

to C

lient

Best Practice Typical

What If The Individual Isn’t Disabled BUT Receives Public Benefits?

• As this group expands, this will become more of an issue

• Special Needs Planners will need to become more adept or coordinate with Elder Law Planners

• There are planning options available• Spend-down• Trusts• Annuities• Gifting • Promissory notes• All of the above

Do All Persons with Disabilities Require Special Planning?

• Only those individuals who meet the definition of disability for public benefit programs require planning• SSI & Medicaid • NOT SSDI & Medicare

Who Requires Settlement Planning?

• Minors• Adults who lack capacity• Adults with disabilities

• Only those who meet the definition of disability for public benefit programs require special needs planning

• Plaintiffs receiving public benefits• Only certain public benefit programs

require planning

Can Other Plaintiffs Be Helped With Settlement Planning

• Even those persons who may not require settlement planning can benefit:• Adults with little to no experience in

financial management• Spendthrifts• Elderly - over age 65 may

need “elder law” planning• Everyone should have a

complete estate plan

Why Public Benefits for Persons With Disability Planning is Needed

• Litigation recovery paid directly to an individual would eliminate eligibility for SSI and Medicaid• Counted as income in month of receipt• Counted as resource first day of next month• Medicare-Set-Aside Accounts are Countable

Assets

• Loss of Medicaid can be devastating • Generally the only source of medical and

community services available to the disabled Individual

Facts Needed By Attorney To DoSpecial Needs Planning

• Type of Public Benefits?• Type of Disability? • Age of Person with a

Disability?• Legal Capacity?• Parent or Grandparent

Alive, Well, and Willing to Help?

• Amount of Assets At Issue?• Living Situation• Ability to Work

Public Benefit Programs for Persons with Disabilities

• Needs-Based Public Benefits:• Supplemental Security Income (SSI)• Medicaid

• Entitlement Public Benefits:• Social Security Disability Income (SSDI)• Social Security – Adult Disabled Survivor• Medicare

• Other benefit programs• Section 8• Veteran Benefits• Food Stamps• General Assistance• Waiver Services

Entitlement Benefits

• If only public benefit programs are SSDI, Social Security, or Medicare No special needs planning is required. Although, it may still be helpful to plan in some circumstances• However, watch out for dual eligibility, meaning that

person with a disability receives both SSDI and SSI or Medicare and Medicaid

• There is often lots of confusion from the person with a disability and their families as to what types of benefits the person receives so important to investigate

Special Needs Trusts

Basic Planning Tools

Basic Planning Tools

• Guardianships• Conservatorships• Protective Order / One-time

Conservatorships• Structured Settlements• Decedent Estates

First-Party Special Needs Trusts

• Special Needs Trusts (SNT) are the only planning tool that allows an individual to preserve litigation proceeds AND to preserve eligibility for needs-based public benefits

• First-Party SNTs are:• (d)(4)(A) SNT (a/k/a Litigation or Payback

SNT)• (d)(4)(C) SNT (a/k/a Pooled Trust)

(d)(4)(A) Special Needs Trust

• Authorized by 42 U.S.C. §1396p(d)(4)(A) and has the following characteristics:• Must be Irrevocable• Must be established by parent, grandparent,

legal guardian, or court• Must be for the sole benefit of a person with a

disability who is under the age of 65• Must provide that on the death of the

beneficiary, the trustee must repay Medicaid for all benefits received by the beneficiary during his or her lifetime to the extent that funds remain in the trust at the beneficiary's death.

PRO’s(d)(4)(A) Special Needs Trust

• Control• Choice of Trustee• Choice of Investment Options

• Integrates well with structured settlements

• Integrates well with a MSA account• Family has an opportunity to inherit• More easily accepting of non-liquid

assets

CON’s(d)(4)(A) Special Needs Trust

• Limited to under age 65• Control

• Choice of Trustee may be inappropriate• Investments could be too aggressive; result in a loss of principal

• Cannot be executed by an individual with capacity• Often results in Probate Court involvement to establish trust and

possible court supervision; bond• Very costly to maintain; No cap on fees

• Family can inherit• Often over-used: small amount of funding• Poor drafting or administration

Practice Tip!

Appoint a Trust Protector

Appoint a profession as Trust Protector if a family member is Trustee

Appoint a family member as Trust Protector if a professional is Trustee

(d)(4)(A) Special Needs Trust

• Change in Social Security’s Program Operations Manual System (POMS)• Early termination clause

• Upon early termination (i.e., termination prior to the death of the beneficiary), the State(s), as primary assignee, would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s)

• Other than payment for those expenses listed in SI 01120.199F.3. in this section, no entity other than the trust beneficiary may benefit from the early termination

(d)(4)(C) Special Needs Trust

• Authorized by 42 U.S.C. §1396p(d)(4)(C) and has the following characteristics: • Irrevocable• Established and managed by a non-profit

association. • Separate account is maintained for each

beneficiary; pooled for purposes of investment and management

• Established by the individual, parent, grandparent, legal guardian, or by a court.

• Residual funds after death are retained by the trust or repaid to the State for medical assistance paid on behalf of the beneficiary.

PRO’s(d)(4)(C) Pooled Trust

• Can be executed by an individual with capacity• No Court supervision required• Professional Administration

• Additional advocacy and resources

• Often fees are capped• Perfect for small settlements• Integrates well with structured settlements• Flexible in a variety of situations• Choice of paying back state or leaving to

charity• Easier and lower cost to establish

CON’s(d)(4)(C) Pooled Trust

• Client has lack of control if administration is poor or relationship breaks down

• Fees• Percentage• Hourly• Flat

• Investment information may not be accessible• Not always accepting of non-liquid assets; depend on

the Trustee

Practice Tip!

Ask for a Trust Protector

Appoint a family member as Trust Protector with the authority to change the Trustee

What Can a SNT Pay For?

• Special Needs Trusts can pay for expenses NOT covered by governmental benefit programs:• Clothing• Telephone, Internet, Cable • Furniture, Audio/Video/Computer

Equipment • Periodic outings and vacations • Pre-need funeral and burial expenses• Taxes

What Can’t a SNT Pay For?

• A SNT CANNOT give cash directly to Beneficiary (this includes gift cards)

• If SNT pays for food, shelter or medical care already being provided by SSI or Medicaid it will reduce (or eliminate) public benefits.• Shelter is defined as food, gas, electricity,

water, sewer, heating fuel, garbage removal, real estate taxes, rent or mortgage

Special NeedsSettlement Planning

Advanced Tools and Skills

• QSF• MSA• SPT

Qualified Settlement Fund

Medicare Set-Aside

Settlement Preservation Trust

Advanced Settlement Planning

• Utilizing Qualified Settlement Funds (QSF)• Can be formed by either side (plaintiff or defense)• Allows for immediate payment of settlement or

judgment proceeds by defendant• Preserves all options for the injury victim(s) and other

claimants without defense involvement• Multiple claimants can resolve their respective

damages• Lien resolution• Medicare-Set-Aside allocations• Structured settlements• Special Needs Trusts• Settlement Preservation Trusts

Advanced Settlement Planning

• MSA and Liability Cases• No CMS guidance• Duty to protect

Medicare’s future interests

• No double-dipping

• Drafting Motions andOrders in relation toMSPA

• Consulting for PI attorney and StructureBrokers

MSA / SNT Planning

• Encourage proper allocation of liability settlements• Non-Economic Damages = Pain and Suffering• Economic Damages

• Wages• Attendant care• Conditional medical payments• Future medical

• Allocate between Medicare vs. Non-Medicare• MSA to receive future Medicare injury related medical expenses• Structures

Practice Tip!

MSA’s are COUNTABLE assets for Medicaid eligibility

MSA / SNT Planning

Special Needs Trust

SNTMSA

Alternatives in Special Needs Planning

Alternative Tools:• VA Trusts• Settlement

Preservation Trust • Elder Law

Alternatives to Special Needs Trusts

• Veterans Affairs• Aid & Attendance

• Different eligibility requirements than Medicaid

• Medical • Financial

• Available to a surviving spouse and dependents; including step-children

Caveat: Must be certified by VA

Alternatives to Special Needs Trusts

• Adults• Settlement Preservation Trusts

• Purely discretionary; helps in the following situations:

• Chronic or pending divorce• Job loss / Unemployment• “Lottery” effect

• Future eligibility = Reform • Flexible drafting• Not to be used to defraud creditors

Settlement for the Elderly

• Traditional Elder Law Tools• MAPT• Annuities• Gifting• Pooled Trust?• Estate Planning

Settlements for Minors

• Small Settlement = Structures• Drip vs. Lump Sum• Avoids fees and cost of Probate Court• Helps protect the

minor’s funds• Static• Beware of back-

loading• It’s my money and

I want it NOW!

Settlements for Minors

• Large Settlement = Settlement Preservation Trust• May be utilized if disability is uncertain• Allows for maturity• Decreases “Lottery” effect• Varies by jurisdiction; state by state;

county by county• Prevents claims by future

creditors/spouses

Conclusion

• Working with persons with disabilities very satisfying and rewarding

• Preserving public benefits;• Providing lifetime financial support by purchasing

items and services that make life more rewarding;• Providing a system of advocacy to preserve civil

rights;• Establishing an efficient, knowledgeable, and long-

term management team;• Providing a safe and clean living arrangement; and• Providing avenues for enjoying all social and

recreational activities that enhance the quality of life

An educational seminar provided by:

Thank YouA presentation for the Academy of Special Needs Planners

Thank YouA presentation for the Academy of Special Needs Planners

12900 Hall Rd., Suite 470 ▪ Sterling Heights, MI 48313Phone: 586-803-8500 ▪ Fax: 586-803-8508

Email: michele@michiganlawcenter.comwww.MichiganLawCenter.com