1. Settlement Planning for a Minor or Person with Special Needs
with [Insert Presenter Information Here]

2. What Is Settlement Planning?
Helps recipients of settlement proceeds:
Achieve their post-loss goals
Transition successfully into their post-settlement financial lives

3. Settlement Planning Topics
Consists of some or all of the following:
Setting Client Expectations
Working with the Client & Family to execute a plan that includes:

4. When to Involve Special-Needs Settlement Planning Professionals
Date of Loss / Injury
Retain Lawyer / File Suit
Trial/Arbitration/Settlement
Resolution
Possible Qualified Settlement Fund
Lien Resolution
Distribution to Client
Best Practice
Typical
Resolution: Allocation – Economic loss (wages, attendant care, future medical needs, MSA) Non-Economic Loss (pain and suffering)
Distribution to Client: Minor, Adult, Disabilities, Medicaid, Probate Court, Decedent?

5. Work With a Settlement Planning Team
No single professional can address all of the issues
Following experts should be consulted:
Special Needs/Estate Planning Attorney
Financial Lien Resolution Attorney
Structured Settlement Broker
Medicare Set-Aside Specialist
CPA or Enrolled Agent
Financial Planner

6. Working as a Team
Provides a very real and long lasting benefit for Plaintiffs
Start Working Together Early
Sets Appropriate Expectations for Plaintiffs
Saves Time for all Professionals
Credibility for Plaintiff’s Attorney
Better Overall Service
Financial, Tax, and Legal professionals working together can provide a comprehensive plan
Avoids mistakes

7. Who Requires Settlement Planning

8. Who Requires Settlement Planning?
Minors
Adults who lack capacity
Plaintiffs receiving public benefits
Only certain public benefit programs require planning

9. Planning for Minors Without Disability
Small Settlement = Structures
Drip vs. Lump Sum
Avoids fees and cost of Probate Court
Helps protect the minor’s funds
Large Settlement = Settlement Preservation Trust
Revocable at age 18
Allows for maturity – Minor controls at age 25 or 30
Decreases “Lottery” effect

10. Do All Persons with Disabilities Require Special Planning?
Only those individuals who meet the definition of disabled for public benefit programs require planning
SSI & Medicaid
NOT SSDI & Medicare
WATCH OUT for dual eligibles Those eligible for both Medicaid & Medicare

11. Can Other Plaintiffs Be Helped With Settlement Planning
Even those persons who may not require settlement planning can benefit:
Adults with little to no experience in financial management
Spendthrifts
Elderly - over age 65 may need “elder law” planning
Everyone should have a complete estate plan

12. Planning for Person Without Disability
Adults
Spendthrift Trusts
Purely discretionary; helps in the following situations:
Chronic or pending divorce
Job loss / Unemployment
“Lottery” effect
Future eligibility = Reform
Flexible drafting
Cannot to be used to defraud creditors

13. Settlement Planner’s Toolbox
Special Needs Trusts (SNTs)
Achieving a Better Life Experience (ABLE) Account
Medicare Set Aside Arrangement (MSAs)
Qualified Settlement Fund (QSFs)

14. SNTs & ABLE Accounts

15. Why Public Benefits for Persons With Disability Planning is Needed
Litigation recovery paid directly to an individual would eliminate eligibility for SSI and Medicaid
Counted as income in month of receipt
Counted as resource first day of next month
Note: Medicare-Set-Aside Accounts are Countable Assets
Loss of Medicaid can be devastating
Generally the only source of medical and community services available to the individual with a disability
20 CFR §420 and 20 CFR §§ (SSI); categorically eligible Medicaid 42 CFR §435.4
Review difference between SSDI and SSI- medicare/Medicaid-means tested vs entitlements

16. Facts Needed By Attorney To Do Special Needs Planning
Type of Public Benefits?
Type of Disability?
Age of Person with a Disability?
Legal Capacity?
Parent or Grandparent Alive, Well, and Willing to Help?
Amount of Assets At Issue?
Living Situation
Ability to Work

17. Public Benefits At a Glance
Means Tested Public Benefits
SSI
Traditional Medicaid
Expanded Medicaid
Entitlement Public Benefits
SSDI
Medicare
Other Benefit Programs
Section 8
Veteran Benefits

18. Needs-Based Public Benefits
SSI Eligibility Requirements
Disabled
Income Test
Must have very low income
Resource Test
In most states, owning $2,000 or more in assets will disqualify a person from SSI and Medicaid benefits
There are exempt assets. For example, one primary residence of any value and one car of any value, irrevocable pre-paid funeral contract
Medicaid Eligibility
Similar to SSI; but not the same
Each State has its own interpretation

19. Affordable Care Act – Health Care
Expanded Medicaid available for anyone up to 138% of the Federal Poverty Limit
No Asset Test for Expanded Medicaid
Not every State has authorized Expanded Medicaid
Assistance covers the working poor with income up to 400% poverty level
No denial for pre-existing conditions
Children can be on parent’s health care plan up to age 26

20. Should Plaintiff Opt for Private Insurance or Expanded Medicaid?
Some Considerations:
Plaintiff have capacity? May need protected entity to hold settlement
Has plaintiff’s state adopted Expanded Medicaid
Does that state’s Expanded Medicaid cover plaintiff’s health care needs?
Cost of private health insurance
Does the private health insurance plan cover plaintiff’s health care needs? Skilled nursing? Etc.
Is loss of SSI an issue?
May not want first party SNT, if accruing Medicaid lien
Plaintiff’s control of settlement

21. Entitlement Benefits
If only public benefit programs are SSDI, Social Security, or Medicare, no special needs planning is required. Although it may still be helpful to plan in some circumstances
However, watch out for dual eligibility, meaning that person with a disability receives both SSDI and SSI or Medicare and Medicaid
There is often lots of confusion from the person with a disability and their families as to what types of benefits the person receives so important to investigate

22. What SSI Provides
SSI provides a modest monthly cash grant for food and shelter to disabled, blind, or aged (65 or older) persons
In 2019, the SSI federal government maximum payment is $771 a month for an individual
Some States supplement this amount. For example, California provides a supplement of $156 a month to the payment
Eligibility for even $1 of SSI (in most States) means automatic eligibility for Medicaid

23. What Medicaid Provides?
Primary medical care coverage:
Doctor visits, diagnostic testing, emergency services, surgery, hospitalization, prescription drugs, dental services, and optometry services.
Ongoing care and recovery
In-home medical care services, personal care services, occupational and physical therapy, outpatient drug abuse services, nursing facility stays, intermediate care facilities for developmentally disabled individuals, and adult day health care.
Other medical-related costs:
Medical supplies, durable medical equipment, and transportation for doctor visits
Waiver programs for home and community based services
Coverage of dental, optometry, podiatry, vision and chiropractic services may not be available all the time. State budget pressures often cause elimination of these benefits.

24. First-Party Special Needs Trusts
SNT is the only planning tool that allows Plaintiff to preserve use of litigation proceeds in the future AND to preserve eligibility for means-tested public benefits
The two most common types of First-Party SNTs are:
(d)(4)(A) SNTs sometimes called Litigation SNTs or Payback SNTs
(d)(4)(C) SNTs sometimes called Pooled SNTs
42 USC §1396p(d)(4)(A) and 42 USC §1396p(d)(4)(C)

25. (d)(4)(A) SNT Requirements
The (d)(4)(A) SNT is authorized by 42 U.S.C. §1396p(d)(4)(A) and has the following characteristics:
Grantor: Established by individual, parent, grandparent, legal guardian, or court
Beneficiary: The trust must be for the sole benefit of a person with a disability who is under the age of 65
Payback Provision: The trust must provide that on the death of the beneficiary, the trustee must repay Medicaid for all benefits received by the beneficiary during his or her lifetime to the extent that funds remain in the trust at the beneficiary's death
The person funding trust must have legal authority over money, e.g., a parent generally does not have legal authority to put minor’s money in trust without court authority

26. PROS of (d)(4)(A) Special Needs Trust
Control
Choice of Trustee
Choice of Investment Options
Integrates well with structured settlements
Integrates well with a Medicare Set Aside Arrangement (MSA account
Family has an opportunity to inherit
More easily accepting of non-liquid assets

27. CONS of (d)(4)(A) Special Needs Trust
Limited to under age 65
Control
Choice of Trustee may be inappropriate
Investments could be too aggressive; result in a loss of principal
Cannot be executed by an individual with capacity
Often results in Probate Court involvement to establish trust and possible court supervision; bond
Very costly to maintain; No cap on fees
Family can inherit
Often over-used: small amount of funding
Poor drafting or administration

28. Pooled SNT Requirements
The Pooled SNT is authorized by 42 U.S.C. §1396p(d)(4)(C) and has the following characteristics:
Grantor: Must be established and managed by a nonprofit association
Joinder: May be joined by the beneficiary, the beneficiary's parent, grandparent, or legal guardian or a court
Beneficiary: The beneficiary may be of any age, but must be disabled and the trust must maintain a separate account for the beneficiary
Trustee: The trustee must be the establishing nonprofit association or supervised by the nonprofit association.
Payback Provision: In most states, after the initial beneficiary's death, excess funds may remain in the pooled trust for other beneficiaries with disabilities; excess funds are subject to repayment only if they do not remain in the pooled trust.

29. PROS of (d)(4)(C) Pooled Trust
Professional Administration
Additional advocacy and resources
Often fees are capped
Perfect for small settlements
Integrates well with structured settlements
Flexible in a variety of situations
Choice of paying back state or leaving to charity
Easier and lower cost to establish
No Court supervision required

30. CONS of (d)(4)(C) Pooled Trust
Client has lack of control if administration is poor or relationship breaks down
Fees
Percentage
Hourly
Flat
Investment information may not be accessible
Not always accepting of non-liquid assets like personal residence; depend on the Trustee

31. What Can a SNT Pay For? Just about anything. For example:
Clothing, telephone (cell phone or land line), Internet, television (cable or satellite), hair and nail care, bedding, laundry, furniture, audio equipment, video equipment, computer equipment, adaptive equipment, toys, musical instruments, electronic devices, maintenance of equipment and household, vehicles, improvements and maintenance of such vehicles, newer and more effective medications than allowed by Medicaid, more sophisticated medical or dental or diagnostic work or treatment for which funds are not otherwise available, other nonessential medical procedures (such as massage therapy or acupuncture), periodic outings and vacations (and other items to enhance the Beneficiary’s quality of life, self- esteem, or situation), pre-need funeral and burial expenses, taxes …. more and more and more
Helpful Hint: Provide a client with list of allowable expenses but set reasonable expectations

32. What Can’t a SNT Pay For?
An SNT is designed to enhance the quality of life of the Plaintiff
To preserve SSI and Medicaid, an SNT should not give cash directly to Beneficiary
If SNT pays for food, shelter or medical care already being provided by SSI or Medicaid it will reduce the SSI check by a small amount
An SNT is not designed to assist anyone but the Plaintiff, thus it cannot be used to make gifts to family members or friends, donations to churches or charities
Reduction of SSI amount from income 20 CFR §§ , and Shelter definition 20 CFR §1130(b)

33. New Settlement Planning Tool –The ABLE Account
Achieving a Better Life Experience (ABLE) account
Passed into law on December 18, 2014
Similar to 529 Plan Educational Plans but for persons with disabilities
As described in following charts, person can fund his or her own ABLE account, yet there are several restrictions on it

34. ABLE Account Issues ABLE Account Who can use?
Only persons disabled before age 26
Who can fund?
Anyone, including person with a disability
How many can person have?
One
Who can control?
Person with a disability and likely their legal guardian, conservator, or agent
Who inherits on death of person with disability
Medicaid first, then can go to heirs

35. ABLE Account Issues ABLE Account How much can fund in a year?
$15,000 (or annual gift exemption)
Is funding gift-tax free?
Yes
Is there a cap on how much can be in account?
Yes, currently $100,000 limitation for SSI recipients and up to State 529-plan limitations
How is income taxed?
No income tax
What type of distributions can be made?
Only “qualified disability expenses” as defined by government

36. Medicare Set Aside Arrangements

37. Why is Medicare Set Aside Necessary?
Congress enacted the Medicare Secondary Payer (MSP) Statute giving Medicare rights as “Secondary Payer”
This regulation prohibits Medicare from making a payment when there is a primary payor involved
Prevents third parties from improperly shifting the payment of medical care to Medicare
The law provides the Center for Medicaid and Medicare Services (CMS) with strong recovery rights if Medicare’s interests are not protected
42 USC §1395y (42 CFR § § ) (42 CFR §411.46),

38. Types of Cases Must That Consider Medicare’s Interest
Medicare’s interest must be considered in ALL cases where future medical care is considered part of settlement AND there is a “reasonable expectation” that Medicare will need to pay for such care
However, CMS will only pre-approve arrangements under specific guidelines:
Worker’s Compensation Cases
Very Defined CMS Review Mechanism
Personal Injury Cases
No Defined CMS Review Mechanism – Although some regions may consider
New CMS Reporting Requirements
42 CFR §§411.46, (workers comp); 42 USC §1395y(b)(8), reporting requirements 42 USC §1395(b)(8)(E) penalty for not reporting

39. What is a Medicare Set-Aside Arrangement?
The Medicare Set-Aside Arrangement (MSA) is the preferred method for handling Medicare’s future injury related medical costs
If the workers compensation settlement meets CMS’ established “review thresholds,” the adequacy of the MSA must be approved by CMS. The review thresholds are:
Whether claimant is already a Medicare beneficiary at time of settlement and the total settlement is greater than $25,000; or
The claimant has a “reasonable expectation” of Medicare enrollment within 30 months of settlement and the total settlement is greater than $250,000
CMS Memo (July 23, 2001) Q1(c) and CMS Memo (April 25, 2006)

40. How To Determine If Plaintiff is Reasonably Expected to Receive Medicare?
Red Flags to Consider Medicare’s Interest are:
Off work for 6 months or longer (SSDI)
Off work for 30 months or longer (Medicare)
Catastrophic injury
Settlement value over $250,000
Age 62.5 or older (i.e., may be eligible for Medicare based upon age within 30 months)
CMS Memo (April 22, 2003) Q2; CMS Memo (April 25, 2006)

41. Medicare Set Aside and Medicaid Eligibility
Note: if plaintiff receives both Medicaid and Medicare then the MSA must be made a part of the SNT Otherwise the assets held in the MSA would interfere with Medicaid eligibility

42. Qualified Settlement Funds

43. Qualified Settlement Funds (QSF) Basics
Offers the following benefits:
Allows for immediate lump sum settlement
Removes defendant from the process
Time to employ experts
Time to do a financial plan for Plaintiff
Time to negotiate liens
Preserves ability to do a structured settlement
Time to establish SNT or MSA
Drawback: Requires court approval + more costs
Internal Revenue Code (26 USC §468B); Treasury Regulations 26 CFR §1.468B-1(c)

44. Mechanics of a QSF Phase One: Phase Two: Phase Three: Establishing QSF
Appoint administrator
Obtain federal tax ID number (EIN)
Settlement between claimants and original defendants
Receive funds from transferors
Phase Two:
Settlement between claimants and QSF
May include periodic payments through a structured settlement
Court approval, if required
Authorization to distribute
Issue 1099s and file tax returns
Phase Three:
Terminate QSF

45. Sample Case Study

46. Case Study
Brian has been offered a personal injury settlement of $1,500,000
He is 56 years old, disabled and is receiving SSI, SSDI, Medicare and Medicaid
He is unclear how he would like to use the money.
His needs include a new wheelchair van, therapy costs, and possibly a new home
There are existing Medicare, Medicaid and other liens that need to be resolved
Defendant’s insurance company refuses to participate in structured settlement

47. Work With a Settlement Planning Team
No one professional can address all issues
At a minimum, the following experts should be consulted:
Lien Resolution attorney to assist with negotiation of Medicare, Medicaid and other case liens
Special Needs/Estate Planning Attorney to assist with public benefits issues, consider whether SNT or QSF appropriate case
Medicare Set-Aside specialist to address Medicare future interests and whether MSA is needed
CPA to consider tax implications of settlement and financial plan
Structured Settlement Broker/Financial Advisor to develop future financial plan and allocate appropriate amount to annuity

48. The Settlement Plan Establish QSF During QSF Administration
Gets defendant out of process
Allows time to negotiate Medicare, Medicaid and other liens
During QSF Administration
Plaintiff’s attorneys’ fees and costs can be immediately paid
Develop Plaintiff’s financial plan
Establish SNT to preserve SSI and Medicaid
Establish MSA to address Medicare’s future interest
Terminate QSF and distribute funds for purchase of structured settlement and fund the SNT and the MSA

49. Thank You
[Insert Name]
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[address]
1/11/2019