How to Avoid Misunderstandings When an SNT Is Part of the Personal Injury Settlement

Too often families have unrealistic expectations with regard to personal injury settlements that incorporate a special needs trust (SNT). In such cases, it’s advisable to involve a special needs attorney as early as possible so that all parties understand what is permitted by public benefits regulations.

A special needs trust (SNT) is a legal agreement through which someone places money or property into the hands of a trustee, who will hold and manage those assets for the benefit of a beneficiary with disabilities.  SNTs primarily serve two purposes. If the beneficiary is unable to effectively handle assets on their own, an SNT enables the assets to be managed on their behalf by a trustee. In addition, if the SNT is properly drafted and administered, the assets that it holds will not affect the beneficiary’s eligibility for means-tested programs such as Medicaid and SSI (Supplemental Security Income).

The trustee controls the SNT and is responsible for all investment decisions and distributions, although he/she may seek advice about the beneficiary’s needs from the individual’s family or a professional care manager. The trustee’s role requires a thorough understanding of the rules governing public benefits in order to spend trust money in a manner that protects the beneficiary’s eligibility.  This includes the requirement that funds are to be used for the sole benefit of the beneficiary, not other family members.

Since most SNTs must provide accountings to the state Medicaid agency or the court to ensure that distributions are in order, the trustee must maintain good records of all receipts and payments. Sometimes the trustee must get approval from the court or a review committee for disbursements above a certain dollar limit.  

Trustees do not give funds directly to the beneficiary, since that would be considered income by Medicaid and SSI and could affect eligibility for those programs.  And rather than making distributions to other family members, the trustee usually pays vendors directly on behalf of the beneficiary.

When families understand how an SNT must be administered in order to protect the beneficiary’s eligibility for important government benefits it can avoid both disappointment and conflict.

Posted on February 8, 2019 .

What Can You Do While Waiting for a Personal Injury Settlement? Attorney Janet Lowder Explains

I’ve seen personal injury cases take up to five years to get settled if they go to trial, and the best personal injury attorneys help their clients prepare for the financial hardships that may arise in the interim. Immediate medical expenses may include hospitalization, as well as long-term rehabilitation in a nursing home. Once the individual returns home, there may be costs for attendant care and renovations for accessibility. If their injuries resulted from an auto accident, they may need to repair or replace the vehicle.

Attorney Janet Lowder

Attorney Janet Lowder

Beyond such immediate financial hits, there’s often a huge drop in household income. Social Security Disability payments don’t begin for five months following the incident. So if the claimant was the family breadwinner and doesn’t have short-term disability insurance, there could be a period when no funds are coming in. Even if the primary breadwinner isn’t the injured party, one parent may stop working in order to act as caregiver.

To deal with this shortfall, families need to evaluate all the options available to pay for medical expenses. They may be eligible for public benefits to help defray healthcare costs. If an auto accident was involved, medical bills may be directed to the insurance company, which will then be repaid through the settlement. If none of the costs are covered by insurance, and the family is getting calls from collection agencies, their attorney can issue a “letter of protection” to advise health providers that they will be reimbursed once the case is resolved. That stops the collection agencies, which often takes some pressure off the families.

Many people use credit cards or loans from family members to make it through this period, repaying those debts once the case is settled. While lawsuit loans are available, we don’t recommend them except in extreme cases, because their rates are extremely high.

Until the case is settled, families should keep detailed records of all expenses, including transportation costs. And any loans should be documented in writing.

By Attorney Janet Lowder, Hickman & Lowder Co., L.P.A.

Posted on September 12, 2018 .

Structured legal fees to save taxes now and build retirement assets

In this last segment of the series, "Why do so many trial lawyers retire broke" Mark Wahlstrom looks at the single most powerful tax and retirement planning tool trial lawyers have; Structured legal fees. Want to pay yourself before you pay back taxes and legal finance? Well a structured legal fee allows you to carefully and ethically defer income, pay back financing at preferred rates and lower current income tax liabilities. Watch this video to learn how to lower taxes, build retirement assets and get off the debt finance cycle for good.

Posted on August 17, 2018 .