Why a Supplemental Needs Trust is Essential for Personal Injury Settlements
Receiving a substantial cash settlement from a personal injury lawsuit can be a moment of great relief and financial security. However, for individuals who are currently receiving, or may need to receive, government benefits like Medicaid or Supplemental Security Income (SSI), this sudden influx of cash can inadvertently create a significant problem.
The unintended consequence? The settlement money, meant to help you recover and live comfortably, could disqualify you from these vital government assistance programs.
This is where a Supplemental Needs Trust (SNT), also known as a Special Needs Trust, becomes a powerful and indispensable tool.
What is a Supplemental Needs Trust (SNT)?
An SNT is a specialized legal arrangement designed to hold assets—like your personal injury settlement—for the benefit of a disabled individual without jeopardizing their eligibility for essential, needs-based government benefits such as Medicaid and SSI.
The core principle is that the assets held in the trust do not count as "countable resources" for benefit eligibility purposes. The funds are managed by a named Trustee and can be used to pay for goods and services that supplement the basics provided by the government programs.
3 Key Benefits of Creating an SNT for Your PI Settlement
For our personal injury clients, establishing an SNT is often the most critical step to ensure their financial award truly serves their long-term well-being.
1. Maintaining Eligibility for Vital Government Benefits
Medicaid and SSI are "needs-based" programs, meaning they have strict limits on the income and assets an individual can possess. A large cash settlement can easily push you over these limits, leading to:
Loss of Medicaid: Which covers essential medical care, prescriptions, and long-term care services (which may be crucial following a serious injury).
Loss of SSI: Which provides a crucial monthly income stream.
An SNT shields the settlement funds, ensuring you remain eligible for these programs, which are often non-negotiable for long-term health and financial stability.
2. Enhancing Quality of Life
The funds in an SNT are specifically designed to pay for items and services that government benefits do not cover, significantly improving the beneficiary's comfort and quality of life. The trust can pay for things like:
Personal Care Services: Non-covered in-home attendants or assistance.
Medical Care: Non-covered treatments, therapies, or specialized equipment.
Enrichment: Education, travel, recreation, and entertainment.
Comfort Items: A modified van, a better-quality wheelchair, or specialized housing costs.
By utilizing an SNT, your settlement can provide extras that make life more comfortable, while Medicaid/SSI cover the necessities.
3. Professional Asset Management and Protection
When a significant sum of money is involved, having a dedicated professional manage the funds is crucial. The Trustee of an SNT is legally obligated to manage the settlement wisely, ensuring the money lasts for the beneficiary’s lifetime. This provides two layers of security:
Financial Expertise: The Trustee can manage investments and distributions responsibly.
Protection: The assets are protected from poor financial decisions, creditors, and potential exploitation.
Timing is Everything: First-Party SNTs
For a settlement recipient, the trust used is a First-Party SNT (funded with the beneficiary's own money, i.e., the settlement).
Crucially, this trust must be established and funded before the settlement money is officially received. Our firm works closely with clients and trusted estate planning attorneys to ensure the SNT is drafted and executed correctly before the final settlement distribution. Mishandling the timing can result in a period of ineligibility for benefits that can be difficult to reverse.
The Next Step
If you or a loved one are receiving a personal injury settlement and are currently on (or anticipate needing) government benefits like Medicaid or SSI, you need expert legal guidance.
The creation of a Supplemental Needs Trust is not just about asset protection—it’s about ensuring the long-term security, health, and comfort that your settlement was intended to provide.
Contact our firm today to discuss your personal injury case and how we can integrate a comprehensive Supplemental Needs Trust into your settlement plan. Don't let your recovery put your vital benefits at risk.
