STRUCTURED SETTLEMENTS, THE PROBATE COURT, AND SPECIAL NEEDS TRUSTS Bridget O’Brien Swartz, J.D., M.P.A. State Bar of Arizona Webinar May 16, 2007

Protecting the Personal Injury Attorney from Liability Ensure client is advised about - Protecting his/her benefit eligibility, e.g., with special needs trust - Ability to structure the settlement Address issues early; don’t overwhelm your client at time of settlement Ask yourself whether a family member, who may also have a claim, is the right person to nominate as fiduciary

Identifying the Public Benefits for which the Client is Eligible Not all public benefits are needs-based: Social Security (retirement) Social Security Disability Insurance (SSDI) Medicare Some public benefits are needs-based: Supplemental Security Income (SSI) Medicaid TANF, Food Stamps, Section 8

Social Security Benefits for the Disabled: SSDI Federal program “Disabled,” i.e., unable to engage in substantial gainful activity Based on the claimant’s earnings record or that of a retired, disabled or deceased parent if disabled before age 22 and through date of application Eligible for Medicare 24 months later (note 5 month waiting period)

Social Security Benefits for the Disabled: SSI Cash benefit based on need Elderly (age 65 or over), blind or disabled Resource and income test Resources and income of spouse or parent “deemed” to eligible spouse or child under 18 living in household Automatic Medicaid eligibility

Medicare Eligibility Not based on financial need; settlement won’t affect eligibility Must be age 65 or older, eligible for SSD or RRD for 24 months, or have end stage renal disease Limited skilled nursing care coverage (institutional and home health care)

Medicaid Benefits Federal/state program Administered by AHCCCS or ADES Provides coverage for otherwise uninsurable Automatically eligible if SSI-eligible If not SSI-eligible, must satisfy resource and/or income test Waiver programs provide home health care

Structured Settlements and Public Benefits Structured settlements = “unearned” income “Deeming” applies to structured settlements payable to ineligible spouse or parent of minor who is SSI-eligible Structured settlements payable to “financially responsible” relative counted as income for household of individual eligible for AHCCCS, food stamps, TANF

Striking a Balance with Structured Settlement Annuities Consider size of settlement in determining whether to utilize a structure Factor into decision up front cash needs, e.g., handicap-equipped vehicle and home Consider unanticipated expenses Don’t put all your eggs in one basket-DIVERSIFY!

Special Needs Trust Established by - parent - grandparent - guardian - court Beneficiary must be - disabled - under 65 Payback provision

Pooled Trust LIKE SNT EXCEPT: Can be “established” by disabled person Can be over age 65 Managed by non-profit Assets pooled for investment Individual accounts maintained No payback if assets remain in trust

The Life Care Plan Use the plaintiff’s life care plan as a tool in determining the best way to structure (preferably, before mediation) Identify what services in the life care plan are anticipated to be covered by public sources Look for and price structures using favorable rated ages for those items that will be paid for privately Finally, determine the best way in which the structure can fund a SNT to meet the needs of the individual

Oh, no! We don’t have enough time . . . If you need time to do the following: - compromise liens - determine allocation among claimants - evaluate structured settlement annuity options - establish special needs trust

§ 468B Qualified Settlement Funds: The Requirements Must have more than one claimant Must be trust, account or fund approved by court order Must be trust under applicable state law Treated as a corporation for income tax purposes

§ 468B Qualified Settlement Funds: The Advantages Removes defendant, their counsel, and structure broker from equation Plaintiff’s attorneys’ fees/costs can immediately be paid Plaintiffs receive income from the settlement held in the fund (after taxes) No constructive receipt!

Probate Court Approval Minor Incapacitated Adult or “Person in Need of Protection” Allocation Attorneys’ fees and costs Structured settlement Special Needs Trust