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Protect public benefits for your special-needs client: a special-needs trust can secure a disabled client's future without jeopardizing public benefits. But don't get tripped up by these common myths.

Article Excerpt
The settlement of a personal injury case is often viewed as the end of a legal battle--one that may have been fought long and hard. But attorneys representing clients with disabilities cannot rest on their laurels. These clients require additional guidance and legal representation to ensure that their eligibility for public-assistance programs--like Medicaid--is not compromised by their receipt of the settlement funds. Before settlement, plaintiff counsel should consult a board-certified elder law attorney and financial advisor well versed in public-assistance issues.

Clients who have disabilities, whether due to injury or illness, often cannot work. Some are not able to care for themselves without help. Mounting medical bills may have left them in severe financial straits, and their disabilities may have limited or eliminated their ability to obtain medical insurance.

Proceeds from the settlement can help to make the client whole and defray the costs of living with a disability. But it may not be enough, and it should never jeopardize the client's ability to tap other financial resources, including public-assistance benefits programs. The type of public benefits your client receives has a tremendous impact on the planning needed to preserve them. In general, the primary government-assistance programs that must be considered fall into two broad categories. Similarities in their names and initials make it easy to confuse them.

The first category is funded by the Federal Insurance Contribution Act (FICA) taxes paid by workers and employers. For purposes of this article, the most important of these are retirement benefits for seniors (often called simply Social Security), Social Security Disability Income (SSDI), and Medicare. These are true entitlement programs, because the recipients have paid premiums into the system and so are entitled to receive benefits.

The second category includes so-called means-tested programs; to qualify for them, a person must show he or she has limited means. The eligibility rules of these programs--Supplemental Security Income (SSI) (easily confused with SSDI) and Medicaid--count an applicant's resources and income. To be eligible for benefits, a recipient must have less than $2,000 in assets and limit ed income--the amount depends on the state where the person lives and his or her living circumstances.

SSI, administered by the Social Security Administration, provides financial assistance to U.S. citizens who are 65 or older, blind, or disabled. (1) The recipient must also meet the financial eligibility requirements. (2)

Medicaid provides health care coverage for those who cannot afford it. This state- and federally funded program is run differently in each state, and eligibility requirements and available services vary. Medicaid can supplement Medicare coverage if the client qualifies for both programs. For example, Medicaid can pay for prescription drugs and Medicare copayments or deductibles.

In most states, even one dollar of SSI benefits automatically triggers Medicaid coverage. You must preserve some level of SSI benefits if your client will need Medicaid in the future. (3)

A special-needs trust can help secure a disabled client's future. The third-party special-needs trust is controlled by state common law, and so-called (d)(4)(A) and (d)(4)(c) trusts are regulated by federal law at 42 U.S.C. [section] 1396p(d)(4)(A) and (C). There are three types of special-needs trusts:

* A third-party special-needs trust is funded and established by someone else--such as a parent, grandparent, or donor--for the benefit of the client. The client still must meet the definition of disability, and there is no age requirement. When the client dies, Medicaid does not have to be reimbursed.

* A (d)(4)(A) trust can be established only for those who are disabled and under...