Individuals with special needs often rely on SSI and Medicaid to cover their living and medical expenses. However, a problem often arises when a child is entitled to funds from a personal injury or medical malpractice settlement. Having over $2,000 in personal assets could immediately cause ineligibility for critical benefits, which may still be needed to fund their care. What is a parent to do in such a situation?Â
Tampa special needs lawyers most often advise setting up a first-party or self-settled special needs trust in which the child is the sole beneficiary. This type of trust can be set up by the individual with special needs (if they have the capacity) or by their parent, grandparent, guardian, or the courts.
It’s important to note that self-settled trusts differ from third-party trusts, which also serve to protect public assistance. A self-settled trust must include a provision that instructs the trustee to repay the state Medicaid program for any funds used on behalf of the beneficiary, in case there are remaining funds in the trust upon the beneficiary’s death. Furthermore, the rules governing permissible distributions for self-settled special needs trusts can be more restrictive compared to third-party special needs trusts.
Once the self-settled special needs trust is established, it can be funded with the settlement proceeds obtained from the personal injury lawsuit. This type of trust may impose limitations on the kinds of payments its trustee can make for the child or adult with special needs and often necessitates an annual accounting report to the local Medicaid agency. It is important to note that a self-settled special needs trust is generally not an option for adults with special needs who are over the age of 65.
Despite these limitations, creating a self-settled special needs trust for your child or adult child with special needs is an effective way to ensure they receive the compensation they deserve from a personal injury lawsuit while preserving their essential public assistance, such as SSI and Medicaid.
To learn more about this important tool or to discuss establishing a special needs trust for your loved one, contact our Tampa special needs attorneys at (813) 438-8503. We are here to help you evaluate your options and develop a plan that protects your child’s settlement funds without jeopardizing access to public benefits needed for future care.