Personal Injury and Medicaid/SSI

Personal Injury settlements could be a little difficult. The difficulty is

that while the IRS does not recognize the settlement for tax purposes as income, Medicaid does recognize it as an asset. The most convenient planning technique is to create a Special Needs Trust for the Personal Injury Settlement. I handle about three to four SNT’s per month for clients receiving a personal injury settlement that are on SSI or Medicaid.

A Special Needs Trust is a unique irrevocable trust whereby the money is not counted as an asset for the individual, but the money could ONLY be used for the sole benefit of the individual. Congress created this hybrid type of trust back in 1983, and it has been widely used since. It is more commonly known as a Pooled Trust, but I am not a big fan of a Pooled Trust. The annual fees are sometimes very high, and if the individual is under 65 years, then a regular Special Needs Trust can be created. Congress changed the rule in December 2016 allowing for an individual to create their own Special Needs Trust, which made it much less expensive for my clients. Prior, they would have had to utilize a Pooled Trust.

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