Turning A Personal Injury Award Into A Trust Fund

This article explains how a personal injury award can be turned into a trust fund and for this article we are focused on what is called a first party special needs trust.

If you have received a personal injury award and plan to receive public benefits due to disability, it is vital that you consider establishing a first party special needs trust (as allowed under federal law 42 U.S.C. Section 1396p(d)(4)(A) prior to receiving the award. Public benefits such as SSI and Medicaid are means tested benefits, i.e. you can only have limited assets in order to qualify and the personal injury award may put you over the asset limit and disqualify you from receiving benefits.

A first party special needs trust receives your personal injury award and a trustee manages the funds to supplement your care needs, while maintaining your eligibility for SSI and Medicaid. This is why it could be vital to you if you receive a personal injury award, you maintain eligibility for benefits but your personal injury award can be used to supplement your care needs.

This type of trust must meet several requirements: It must be established by a parent, grandparent, legal guardian or a court, it must be irrevocable (cannot be changed) and it must be for the sole benefit of a beneficiary under the age of 65 when the trust is established. Finally, the beneficiary (you) must be disabled according to Social Security’s definition and the state must be reimbursed for all Medicaid benefits once you pass away.

As discussed, there are particular rules related to how these trusts are established, how the funds can be used and the rules for Medicaid eligibility and qualification are different in every state. Your particular circumstances might mean that it is best that you do not create this type of trust, but it is imperative you walk away from this article understanding this must be considered if you are receiving a personal injury award and are disabled. You can begin this process by discussing it with your personal injury attorney if they have not already mentioned this to you.

An experienced Missouri estate planning and elder law attorney can work with your personal injury attorney to help decide if this is a good fit for you

Thanks to our friends and contributors from Legacy Law Center for their insight into estate planning and trust funds.