|Preserving Your Personal Injury Settlement|
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|Preserving Your Personal Injury Settlement|
|Written by Jay Kearns|
|Tuesday, February 08 2011 19:42|
BY: JOHN F. KEARNS III, CELA
Congratulations! You have just obtained a big personal injury settlement for your disabled client. Don’t celebrate early. Your joy will quickly turn to despair over a legal malpractice claim if you do not plan for your client’s long-term medical expenses after the settlement. A post-settlement plan without a review of the 1998 revision to C.G.S. §45a-151, and the recent Connecticut Supreme Court’s decision in Department of Social Services v. Saunders, could result in ruin for both you and your client. Your client will be unhappy if the client is required to repay the Medicaid lien and spend-down the balance of the settlement.
As a personal injury attorney, you must familiarize yourself with these recent legislative and judicial developments regarding special needs trusts under 42 U.S.C. § 1396p (D)(4)(A). The purpose of this article is to outline how to protect your client’s settlement and to protect yourself from a potential malpractice claim in light of the Saunders case in which the Connecticut Supreme Court indicated that a fiduciary’s failure to protect the settlement of an incapacitated plaintiff is a dereliction of duties.
The D4A and D4C Trusts
Previously in Connecticut, self-settled trusts could not be established with the funds of the disabled beneficiary, which would protect the settlement and allow the recipient to maintain Medicaid eligibility. See Forsyth v. Rowe, 226 Conn. 818, 629 A.2d 379 (August 3, 1993). One week after the Forsyth decision, Congress passed OBRA ’93 (Omnibus Budget and Reconciliation Act of 1993) which carved out two major exceptions to the Forsyth rule. The “D4A” and “D4C” exceptions allow funds of a disabled beneficiary to be used to fund a special needs trust provided that the State receives repayment as a remainder beneficiary upon the Medicaid recipient’s death.
Under 42 U.S.C. § 1396p (D)(4)(C), or “pooled trusts”, assets of a disabled person may be used to fund a special needs trust, while maintaining assistance benefits eligibility providing:
The D4A and D4C trusts permit the disabled plaintiff to retain his or her public assistance programs and place the settlement monies in trust for their use. Although the trust assets must be paid back to the state upon the beneficiary’s death, without this trust, the settlement proceeds would be spent-down within several years on un-reimbursed, expensive healthcare, thereby leaving the plaintiff impoverished.
The Saunders Case and §45a-151
Jamie Saunders, an incapable, was rendered a quadriplegic due to medical malpractice and he sustained permanent impairment to his upper and lower extremities. Jamie’s conservator reached a $1.8 million settlement agreement with the defendants. The net settlement of $579,824.02 was available after court costs, attorney’s fees and the Medicaid lien were paid. The Newtown Probate Court approved the creation of a D4A special needs trust for Jamie’s benefit. The attorney general appealed the probate court’s statutory authority to establish this trust to the Danbury Superior Court. On appeal, the court held that the probate court did not have statutory authority to approve the creation of the trust.
The Supreme Court Says That Failure to Plan is a Dereliction of Duties
Saunders states that it may be a conservator’s duty to create and fund a D4A trust. The Connecticut Supreme Court found that the probate court is under a duty to protect a ward’s assets, and the conservator, acting as an agent for the court, is under the same duty.
How do Special Needs Trusts Work?
The special needs trust is designed to maintain the trust beneficiary on public assistance benefits, while receiving trust distributions for “luxuries”. This paradox is accomplished by the prohibition of trust distributions for the disabled beneficiary’s basic support needs, which are provided by public assistance. The trustee is prohibited from making any distributions for the beneficiary’s health, maintenance or support. Public assistance programs provide basic support needs for the individual, while the trust provides other essential extras that are not provided by government programs.
Coordinating Special Needs Trusts with Public Assistance Benefits.
Two of the most common forms of government assistance programs are Title XIX, or Medicaid, and Social Security Supplemental Income (SSI). An applicant is guaranteed public assistance benefits providing he or she meets certain eligibility criteria. Title XIX, codified under 42 U.S.C. § 1396 of the Social Security Act, is a joint sponsored program of the federal government and the fifty states, and a Connecticut applicant can have no greater than $1,600.00 in countable assets to be eligible. SSI recipients can have no greater than $2,000.00 and the extent of the limitation on income depends on the type of income that the applicant receives.
After the Saunders decision and the revision to § 45a-151 you must be familiar with the strategy of using a special needs trust to preserve the settlement proceeds of a disabled plaintiff in a personal injury case. Any plan to establish a special needs trust and ensure continued eligibility for public assistance programs should include such steps as (1) identifying the relevant sources of public benefits, (2) structuring the payment of the lien, and the execution and the funding of the trust, (3) taking steps to qualify or re-qualify the client for public assistance, (4) meet reporting obligations for the Department of Social Services regarding eligibility and the Department of Administrative Services regarding liens, (5) anticipate potential denials and plan for appealing such denials, (6) address estate planning issues, with the client’s relatives who wish to provide for the disabled individual in their estate plan.
Kearns & Kearns
1121 New Britain Avenue
West Hartford, CT 06110