Lawyers: Consider Government Benefits in Personal Injury Settlement Negotiations

Plaintiffs in personal injury lawsuits are more likely to settle their cases than pursue the cases to jury verdicts. One thing that should be kept in mind during the negotiation of a settlement is the availability of government benefits and the possibility that a plaintiff may someday need one or more of them. However, a plaintiff’s lawyer may not have government benefits in mind during the negotiation. California lawyer Jennifer Steneberg of the Dale Law Firm, PC explains why plaintiff’s lawyers need to be thinking of government benefits.

Jennifer Steneberg

There are several reasons, Steneberg explains, why government benefits should be kept in mind during a settlement negotiation. The obvious one is that a plaintiff might already be a public benefits recipient. If that is the case, the plaintiff’s lawyer needs to assess the situation to determine the value of government benefits in light of the settlement. It is necessary to look at the plaintiff’s household and family and think about the long-term situation of the plaintiff.

Another possibility is that a plaintiff is newly disabled and is not yet receiving government benefits. In that situation, Steneberg says, the plaintiff’s lawyer needs to make an assessment of whether government benefits will be a needed part of a plaintiff’s financial and personal well-being.

Steneberg says that there are two areas of benefits to consider. First, there are cash assistance programs—such things as Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), both administered by the Social Security Administration. There are also health coverage programs. These include Medicare and Medicaid. Beyond the health care benefits, Medicaid also provides some other support benefits, including in-home support. Some of these services could be very expensive if one had to purchase them privately. Protecting a plaintiff’s financial eligibility using a special needs trust, perhaps, can be very important, as settlement benefits sometimes become exhausted rather quickly.

Eligibility to receive government benefits will depend on the specific benefit in question. For example, a person with a good work history may well become eligible for SSDI or some other disability insurance. As to those benefits, Steneberg notes, there is no eligibility requirement other than the disability itself. If those benefits are not available, the plaintiff might have to apply for SSI. Another need might be Medicaid benefits. Those benefits have a financial eligibility test that requires a low income in order to qualify. Also, an individual is often not allowed to have personal resources in excess of $2,000.

A smart strategy for a plaintiff’s attorney in such a situation is to team up with a special needs attorney early on in the settlement negotiation. The earlier, the better, Steneberg says, and certainly prior to the settlement conference. In this approach, the client’s long-term needs can be taken into consideration, including reviewing a life care plan, if one has been prepared. The special needs attorney can help make everyone involved aware of benefits that might be available in the community that will be of benefit to the plaintiff. Also, it is important to structure the settlement so that adequate funds are available to cover immediate needs that a plaintiff and family might encounter. These might include home modification, adapted equipment, vehicles, and similar kinds of needs. The other issue is to be sure that an adequate cash flow is provided long-term for continuing needs.

Jennifer L. Steneberg is associated with the Dale Law Firm, PC in Pacheco, California. She is committed to advocating for persons with special needs, and she has spent much of her adult life working in the area of disability rights. She is also a member of the Special Needs Alliance. The Settlement Channel is a featured network of Sequence Media Group. 

New Structured Settlement Annuity Provider, Independent Life

Today a new Structured Settlement Annuity Provider was announced and is entering the market for underwriting structured settlement annuities. Independent Life is announcing at the Fall NSSTA meeting and beginning the roll out and pre-launch phase ahead of their commencement of business. Per the press release provided to The Settlement Channel:

"After four years of designing and creating a new annuity provider with valuable input from industry leaders, Independent Life is weeks away from entering the structured settlement market. We will make a formal announcement at the NSSTA Fall Meeting in San Antonio where industry experts will have an opportunity to meet and greet the executive team."

The main features of this new company are:

• Annuities only for the structured settlement market
• Comprehensive medical underwriting for qualifying cases
• Competitive upper-tier pricing
• Ongoing financial support for broker and planner initiatives that promote the growth of the settlement industry for the benefit of all stakeholders
• An executive team with over 100 years of previous structured settlement experience. 
• Domiciled in a major state with excellent regulatory reputation for oversight. 

It is expected that over the next month more details on the new company and it's approach will become known. This is the first new life market to enter the structured settlement market since Mutual of Omaha several years ago and represents the first special purpose life market specifically designed to underwrite structured settlement annuities. 

It will be interesting to see what supporting business lines will be included in this venture as it expands, such as structured legal fees, non-qualified immediate annuities or possibly taxable damage annuity options as well. Either way it's good to see a new entrant into a stale market and hopefully this portends further interest in the market by life companies and investors in the coming years. Members of the executive team include long time industry experts Dan Durbin as VP of Marketing and Sales and Patrick Hindert, VP of Business Development. 

How to Tell If a Pooled Special Needs Trust Would Fit Your Needs. Jennifer Lile Explains

Special needs trusts have been the subject of several reports on The Settlement Channel. There are several types of special needs trusts, including the pooled special needs trust. The pooled trust is not the right choice in every situation for a person with special needs, but it can be a valuable tool in the right situation. In this report, Jennifer Lile discusses the nature of the pooled special needs trust and how it may be beneficial.

Lile explains that a pooled special needs trust is a trust whose corpus is exempt from the means testing associated with public benefit programs like Medicaid and Supplemental Security Income (SSI). The exemption is provided by 42 U.S.C. § 1396p(d)(4)(C). Under the Social Security Program Operations Manual System (POMS), pooled SNTs are not counted as resources when making eligibility determinations. A pooled special needs trust is established and administered by a nonprofit entity to manage and protect the assets of individuals with disabilities who are dependent on government benefits to meet their basic needs.

Lile notes that there are two types of (d)(4)(C) trusts. First-party, or self-settled, pooled trusts may be established by the individual with a disability, a parent, a grandparent, or a guardian. They are funded with assets belonging to the individual with a disability (i.e. the proceeds of a personal injury settlement, an  inheritance, or a lump sum Social Security payment). Third parties may fund a (d)(4)(C) trust, but would be better served by using a pooled or private third-party discretionary trust,  because (d)(4)(C) trusts have a mandatory payback requirement. “Upon the death of the beneficiary, any funds remaining are subject to being retained by the nonprofit administrator” or being paid as reimbursement to a state or states in repayment of medical assistance provided to the beneficiary during the beneficiary’s life.

Lile says that (d)(4)(C) trusts can be established for anyone who has been determined by the Social Security Administration to have a qualifying disability and is under 65 years of age. In about twenty states, a person with a disability of any age may establish a pooled trust account.

When a beneficiary dies, any funds remaining in the trust must be administered in accordance with the provisions of 42 U.S.C. § 1396p(d)(4)(C) and the Social Security POMS. One option, Lile says, is for the remaining funds to be distributed to a specifically-authorized nonprofit entity, typically the nonprofit entity that administers the trust. Otherwise, to the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must pay to the state(s) an amount equal to the total amount of medical assistance paid on behalf of the beneficiary by the state(s). Lile points out that the main purpose of this type of trust is to provide funds to improve or maintain the quality of life of the beneficiary, such as paying for items or services not otherwise covered by Medicaid.  In general, the goal should not be to have a large amount remaining in the trust upon the death of the beneficiary.   Some pooled trust companies will allow individual remainder beneficiaries to be named in the event that the Medicaid claim for reimbursement is small and a balance remains after the state has been fully paid back.

Lile says that there are several reasons why someone might consider using a pooled trust. First, in most states, there is a $2,000 limit on funds that can be retained by a person in order to be eligible for federal public benefit programs, so the pooled trust account is a way to avoid the immediate spend down of assets above this resource limit. Another advantage of a pooled trust is the long-term access to a professional trustee. Lile explains that pooled trusts must be administered by a qualified nonprofit partnering with a financial institution that serves as a professional trustee, and because funds are managed as a pool, the trustee and administrative fees are not as expensive as they would be with an individual trust. Also, a pooled trust makes sense where the amount of assets coming to the beneficiary is too small to justify the legal fees or professional trustee fees associated with other types of special needs trusts, such as a trust established under 42 U.S.C. § 1396p(d)(4)( A).

In the case of third-party funded pooled trusts, some states allow “dry” trusts, where the paperwork is done to have the trust in place in advance, but not funded until, the death of a parent or grandparent.

Another advantage of a pooled trust is the expertise of the nonprofit administrators. In order to properly administer pooled trusts, they must stay abreast of the law in ways that family members typically would not. Finally, a pooled trust is advantageous in that the assets are invested as a pool, allowing broader market exposure and the potential for generating greater growth.

Jennifer Lile

People who are thinking about using a pooled trust should consider the following: What services does a particular pooled trust company provide? What are the set up costs and annual fees? What is the process for distributing funds? What are the trust’s investment policies? How often are reports issued and what details are included in their reports? What are the opinions of other families or special needs attorneys who have worked with a particular pooled trust company?

Jennifer L. Lile is a shareholder and director with Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. Her practice focuses on the areas of estate and special needs planning, trust, probate and elder law. Jennifer is a Certified Specialist in Estate Planning, Trust and Probate Law, by the Ohio State Bar Association, and a Certified Elder Law Attorney (CELA) by the National Elder Law Foundation, as accredited by the American Bar Association and by the Ohio State Bar Association. She has served on many non-profit boards and is currently an officer on the board of directors for the Special Needs Alliance, as well as president of the Stark County, Ohio, Bar Association. The Settlement Channel is a featured network of Sequence Media Group.