Sometimes a loved one is born with special needs; however, a catastrophic accident can also lead to a loved one becoming a “special needs” individual. When that is the case you can face a dilemma when it comes time for your loved one to accept a personal injury settlement or award. If your loved one is dependent on the benefits offered by federal programs such as Medicaid or SSI a lump sum injury settlement or award can cause your loved one to become ineligible for those benefits. Often the best solution is to create a special needs trust.
Although most of us don’t want to think about the possibility the trust is that an individual could suddenly become incapacitated or disabled at any time. Sometimes this happens because of a horrible car accident. Another common scenario is a failed surgery that caused permanent disability. In situations such as these if another party was at fault, or negligent, the injured victim may eventually be entitled to a significant amount of compensation for his or her injuries. If this happens to a loved one you need to be prepared to step in and ensure that the compensation your loved one receives is protected.
If your loved one suddenly becomes incapacitated or disabled you may find yourself in the role of caretaker. The law, however, still considers your loved one to be an adult (assuming he or she is over the age of 18) and, therefore, will be the person to whom the check is made out in a personal injury settlement or award. Personal injury lawsuits often take years to settle. In the meantime, your loved one may need assistance from federal benefit programs. Eligibility for those programs requires the recipient to be below income and resource limits. If your loved one suddenly receives a large settlement or award he or she could be required to spend all that money before being eligible for benefits again unless you plan ahead.
A special needs trust may be the answer. This is a type of trust specifically designed to protect assets owned by a special needs individual. When properly drafted, a special needs trust will protect the assets and allow them to be used to supplement federal benefits AND ensure that your loved one continues to be eligible for those benefits.
If you think a special needs trust could help you and your loved one consult with your estate planning attorney as soon as possible.
Stephen A. Mendel, Estate Planning Attorney
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