1. PUBLIC BENEFITS and STRUCTURED SETTLEMENTS
Bridget O’Brien Swartz, J.D., M.P.A.
Summit Convention, Phoenix, Arizona
October 28, 2005

2. Protecting the Personal Injury Attorney from Liability
The Grillo case is often cited by the insurance industry for the proposition that an attorney may be liable for failing to propose a structured settlement. See Grillo v. Petiete et al., Cause No and Grillo v. Henry Cause, , 96th District Court, Tarrant County Texas.

3. Protecting the Personal Injury Attorney from Liability continued
The Grillo clearly stands for the proposition that the personal injury attorney (and guardian ad litem) may be liable for failing to set up a special needs trust where public benefits are concerned. See id.; see also Dept . Of Social Services v. Saunders, 247 Conn. Lexis 25 (1999).

4. 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

5. 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)

6. Social Security Benefits for the Disabled: SSI
Federal program
Elderly (age 65 or over), blind or disabled
Resource limit of $2,000 countable resources for single person
Excluded resources include house, car, household goods and personal effects, burial arrangements
Transfer penalties apply: one month of disqualification for every $579 transferred up to max of 36 months

7. SSI continued
Maximum benefit of $579/mo for single and $869/mo for married (2005)
Income = food, shelter, cash
First $20 of unearned income disregarded and then SSI reduced $ for $
First $65 of earned income disregarded and then SSI reduced 50 cents for every $1
“Deeming” of income/resources of parent to minor child and to spouse
Categorically or automatically eligible for Medicaid in 1634 states

8. Medicare and Medicaid Benefits
Medicare-eligible if 65 or over, entitled to SSD or RRD for 24 months, or diagnosed with end stage renal disease or ALS
Medicaid-eligible if SSI-eligible (only in 1634 states)
Medicaid-eligible if otherwise meet income and/or resource requirements

9. Structured Settlements and Public Benefits
Structured settlements treated as “unearned” income if payable directly to the individual or someone on his behalf, such as guardian/conservator
For purposes of SSI-eligibility, “deeming” applies to structured settlements payable to parent of minor or spouse
For purposes of other needs-based public assistance programs, structured settlements payable to “financially responsible” relative living in household may be considered

10. Deferral of Initial Payout and the Guaranteed Period
SSI and/or Medicaid may treat deferral of initial payout as an “uncompensated transfer” subject to penalty
In one instance in AZ, Medicaid (AHCCCS) treated the guaranteed period as an “uncompensated transfer” subject to penalty

11. Legal requirements for a Special Needs Trust
Must be “disabled” according to the SSA
Must be established before age 65
Must be established by a parent, grandparent, guardian, conservator, or court of law
Must provide for reimbursement to Medicaid up to the cost of medical services provided on termination of the trust (note, this is in addition to the lien)
State law may have additional requirements, specifically, regarding treatment of disbursements

12. Structured Settlements and the Special Needs Trust
If a special needs trust is established, then the payee on the structured settlement must be the trust and the designation must be irrevocable
The SSA has clarified that a structured settlement annuity policy irrevocably made payable to a SNT is neither income to the recipient nor a countable resource (note, POMS to be issued in the near future-we hope)

13. Structured Settlements and the Special Needs Trusts continued
Contingent payee of a guaranteed period must also be trust to preserve Medicaid’s reimbursement rights (note, don’t try to circumvent by naming spouse or parents, or else “uncompensated transfer!”)
Provide for sufficient liquidity to pay estate taxes if applicable, i.e., include commutation riders to provide for 50% commutation on death

14. 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
Don’t put all your eggs in one basket; in other words, treat the structured settlement annuity as part of a diversified investment portfolio (structure = bonds)

15. Special Needs Trust Counsel and The Life Care Plan
Encourage the personal injury attorney to engage special needs trust counsel
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

16. The Life Care Plan continued
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