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Coordinating the Use of Special Needs Trusts and Medicare Set-Asides to Protect Government Benefits

Today, the Medivest Blog presents a guest post from Stephen W. Dale, Esq., LL.M.:

Steve Dale here, from The Dale Law Firm, PC in Pacheco, CA. My practice specializes in Estate Planning for families with special needs. In many of our cases we deal with personal injury settlements. A large portion of those clients receive government support, such as SSI, SSDI, Medicare and Medicaid and therefore both Special Needs Trusts (SNTs) and Medicare Set-Asides (MSAs) are a consideration.

The Relationship between SNTs and MSAs. It is our role to help our families to protect those benefits by setting up a system of support that addresses both their immediate and long term needs in a way that adheres to the complex rules and restrictions of federal, state and local regulations and to advise them on changes in funding and regulations. We also work to help our clients understand and address MSAs. These actions are especially important in today’s atmosphere of budget cuts and benefits reductions.

Protecting Benefits:  Part of the duties of an estate planning attorney when working with settlement awards is to look at what kind of benefits are essential for that particular plaintiff. If maintaining needs based benefits such as SSI, Medicaid and In-Home Support Services (IHSS) are essential, then, in all likelihood, a SNT is needed. In addition, if the plaintiff also needs to protect their Medicare benefits then an MSA is needed and the MSA needs to be placed inside the self-settled SNT.

Administration:  Where as an MSA can generally be self-administered, it cannot be self-administered if it is inside a special needs trust.  For the plaintiff that is trying to preserve their needs based benefits self-administration would cause the funds to be considered a resource. Because of the complex rules in the administration of an MSA it is absolutely essential to have an MSA administrator who is experienced and committed to keeping up with the law. It creates a situation where you have two tiers of rules that you must pay attention to.  First, what is appropriate to protect Medicare’s interest and second, how you can accomplish that without the distributions becoming an income or resource for these needs based benefits.

While many trustees of special needs trusts are very familiar with making distributions in a manner that preserves needs based benefits, few are familiar with the distribution specifics that Medicare pays for. Medivest provides the structure and knowledge base that fulfills those needs and we utilize them often.