Q. A few years ago, I was injured in a car accident and my lawyer says that we are close to settling our court case. I heard that, if I received the settlement, I could lose my Medicaid and other benefits. Is this true?
A. This certainly may be true. Medicaid is needs based. Eligibility depends upon your income and your assets. If a settlement from a personal injury case increases your assets sufficiently (which, in most cases, it will), you can lose your Medicaid.
However, all is not lost. There is a provision in the New York State Estates, Powers and Trusts Law, which allows you to create a Supplemental Needs Trust ("SNT") to hold your proceeds and, if done properly, Medicaid benefits will continue. The intent of this trust is to "supplement and not supplant" governmental benefits. The idea is that, if you are suing someone for causing you injury, you should be the one to receive the benefits of your lawsuit. If the only result would be that the government could stop paying you your benefits, only the government would reap the rewards. Unfortunately, it seems that many personal injury attorneys, understandably not well versed in elder law, do not foresee your possible loss of benefits nor are they aware of the SNT as a remedy. If that is the case, it is important that you suggest to your lawyer that he consider having such a trust created and including it in the settlement.
Like any other trust, the funds are controlled by a Trustee. With some restrictions, the Trustee may spend money on your behalf for such things as medical treatment not otherwise covered as well as "luxuries" such as travel, companionship, hobbies and education. Emphasis is placed on raising one’s quality of life over and above the bare minimum achievable on government benefits. As you can see, it is important to choose a Trustee who can be relied upon to spend your money well for these purposes.
There are two types of Supplemental Needs Trust. The first is referred to as a "First Party" or a "Self - Settled" SNT. This is a trust where you are funding it with your own money such as a settlement you received from a personal injury case. In return for preventing you from losing your government benefits, with this type of SNT you must provide that any monies left in the trust at the time of your death shall first be used to repay the State for the benefits you received during your lifetime. If there is anything left after this repayment, it may be distributed to whomever you wish, for example, spouse, children or other heirs. There is also a restriction with a Self-Settled SNT which requires, in general, that it may only be utilized by those under age 65.
The second type of Supplemental Needs Trust is referred to as a "Third Party" SNT. This is one which is created and funded by someone other than yourself (and, therefore, not applicable to a personal injury case). The "Third Party" SNT is most commonly used when parents leave money in their wills to a disabled child. Rather than the gift being distributed directly to such child, the will provides that it be distributed to the SNT for the child’s benefit. The trust must be created before the will is signed. Unlike the Self-Settled SNT, the Third Party SNT does not require repayment to the State. All remaining funds at the time of the death of the beneficiary may be given to whomever the creator of the trust desires.
