protect yourplaintiff
DESCRIPTION
Broad scope presentation for Consumer Attorneys & Settlement Brokers covering settlement planning, public benefits and first party Special Needs Trusts.TRANSCRIPT
Case
disco
very
&
stra
tegie
s to
prote
ct y
our
plain
tiff (3
Par
t
Series)
By Pa
tric
k Fa
rber
, Kev
in U
rbat
sch &
Will
iam
Lindah
l
Our team of experts
Patrick C. Farber is a structured settlement broker in California. He specializes in settling medi-cal malpractice, physical injury, non-physical injury, product li-ability, workers’ compensation, mass torts, punitive damages, employment and elder abuse cases with structured settlements in court hearings, arbitrations and settlement conferences. 800-734-3910,
Kevin Urbatsch is a principal of the estate
planning law firm, Myers Urbatsch P.C. located
in San Francisco, California. Kevin is a
nationally recognized expert in planning for
persons with disabilities and their families. Kevin
is a Certified Specialist in Estate Planning,
Trust, and Probate Law by the California State
Bar Board of Legal Specialization. He is a
charter member of the Academy of Special
Needs Planners; a member of the National
Academy of Elder Law Attorneys; the California
Advocates for Nursing Home Reform; Wealth
Counsel, the Bar Association of San Francisco,
Probate & Trust Section; and the State Bar of
California, Trust and Estate Section. Kevin is a
regular speaker on special needs planning
issues locally and nationally. He has also
numerous published books and articles on
special needs planning.
Will Lindahl is the Enrollment Director CPT and a professional fiduciary with Fiduciary Matters of San Diego. He has developed online individual & pooled special needs trust administration systems utilized by pooled trust providers, national brokerage firms and banks. He continues to speak and publish materials on individual and pooled special needs trust administration. Will has spoken nationally on protecting Medicaid, SSI and other government benefits, trust administration and Medicare & Medicaid fraud.
[email protected]@myfiduciarymatters.com
3 hr Series Objectives
Settlement Planning 1 CLE• Case discovery tools to use to identify when special planning for plaintiff is necessary
• QSFs• MSAs
Public Benefits 1 CLE• Identify solutions to protect your plaintiffs government benefits.
• Learn which benefits impact your practice.
Special Needs Trusts 1 CLE• When to use which option• What can be paid from trust• Impact on case & plaintiff• How to utilize & evaluate SNT providers
Settle
men
t
Plannin
g
By Pa
tric
k Fa
rber
, Kev
in U
rbat
sch &
Will
iam
Lindah
l
Settlement planning introduction
Settlement Planning is a process that helps recipients of settlement proceeds use those
proceeds to achieve their post-loss goals and transition successfully into their post-settlement
financial lives
Proper settlement planning will include:
Understanding the Plaintiff’s situation
Utilizing the appropriate tools to address Plaintiff’s
situation
Plaintiff’s lawyers (arguably) have a
legal duty to provide
settlement planning for
clients
SETTLEMENT PLANNING INTRODUCTION (CON’T) Settlement Planning consists of some or all of the following:
Lien and Repayment Resolution Medicare, Medicaid, hospital, doctor etc.
Tax Planning Plan to minimize income and estate taxes
Financial Planning Comprehensive financial plan and possible structured
settlement Estate Planning
Consider Living Trust, Will, Guardianship or Conservatorship, Powers of Attorney and Health Care Directives (aka Living Wills)
Special Needs Planning SNT for Medicaid and Medicare Set Aside for Medicare
Why is Medicare Set Aside (MSA) necessary?
Congress enacted the Medicare Secondary Payer
(MSP) Statute giving Medicare rights as “Secondary Payer”
This regulation prohibits Medicare
from making a payment when
there is a primary payor involved
Prevents third parties from improperly shifting the payment of
medical care to Medicare
The law provides the Center for
Medicaid and Medicare
Services (CMS) with strong
recovery rights if Medicare’s interests are not protected
When to consider MSA
Medicare’s interest must be considered in ALL cases where future medical care is considered part of
settlement AND there is a “reasonable expectation” that Medicare will need to pay for such care
However, CMS will only pre-approve
arrangements under specific guidelines:
Worker’s Compensation
Cases
Very Defined CMS Review Mechanism
Personal Injury Cases
No Defined CMS Review
Mechanism – Although some
regions may consider
New CMS Reporting
Requirements
What is a Medicare Set-Aside Arrangement?
The Medicare Set-Aside Arrangement (MSA) is the preferred method for handling Medicare’s future injury related medical costs
• If the workers compensation settlement meets CMS’ established “review thresholds,” the adequacy of the MSA must be approved by CMS. The review thresholds are:
• Whether claimant is already a Medicare beneficiary at time of settlement and the total settlement is greater than $25,000; or
• The claimant has a “reasonable expectation” of Medicare enrollment within 30 months of settlement and the total settlement is greater than $250,000
If the plaintiff receives both Medicaid and Medicare then the MSA terms should be stated inside an SNT otherwise the MSA would interfere with Medicaid eligibility
How to determine If Plaintiff is reasonably expected to receive
Medicare?
Red Flags for Litigation Plaintiff or Worker’s Compensation Claimant’s Settlement to Consider Medicare’s Interest are:
Off work for 6 months or longer (SSDI)
Off work for 30 months or longer (Medicare)
Catastrophic injury
Settlement value over $250,000
Age 62.5 or older (i.e., may be eligible for Medicare based upon age within 30 months)
Qualified Settlement Funds (QSF) Basics
Offers the following benefits: • Allows for immediate lump
sum settlement• Removes defendant from
the process• Time to employ experts• Time to do a financial plan
for Plaintiff• Time to negotiate liens• Preserves ability to do a
structured settlement• Time to establish SNT or
MSA
Trust created pursuant to Treasury regulations• Requires court approval• More costs Trust created
pursuant to Treasury Regulations
Mechanics of a QSF
Establishing QSFAppoint administratorObtain federal tax ID number (EIN)Settlement between claimants and original defendantsReceive funds from transferors
Phase One:
Settlement between claimants and QSFMay include periodic payments through a structured settlementCourt approval, if requiredAuthorization to distributeIssue 1099s and file tax returns
Phase Two:
Terminate QSF
Phase Three:
MSA + SNT + SS Annuity + QSF = Happy Plaintiff
Medicare Set Aside takes into account Medicare’s future interest in the settlement
Special Needs Trust preserves SSI and Medicaid eligibility and allows settlement dollars to enhance Plaintiff’s quality of life
Structured settlement provides tax-free growth and guaranteed payments (often for life)
Qualified Settlement Fund allows for immediate payment of settlement or judgment proceeds by defendant, while preserving all options for the injury victim and other claimants without defense involvement
Case Study
Bri
an
has b
een
off
ere
d a
p
ers
on
al in
jury
sett
lem
en
t of
$1
,500
,000
He is 56 years old, disabled and is receiving SSI, SSDI, Medicare and
Medicaid
He is unclear how he would like to use the
money.
His needs include a new wheelchair van, therapy
costs, and possibly a new home
There are existing Medicare, Medicaid and other liens that need to
be resolved
Defendant’s insurance company refuses to
participate in structured settlement
Settlement Planning Team
No one professional can address
all issues
Lien Resolution attorney to assist
with negotiation of Medicare, Medicaid and other case liens
Special Needs/Estate
Planning Attorney to assist with public benefits issues,
consider whether SNT or QSF
appropriate case
Medicare Set-Aside specialist to address
Medicare future interests and
whether MSA is needed
CPA to consider tax implications of settlement and financial plan
Structured Settlement
Broker/Financial Advisor to develop
future financial plan and allocate appropriate
amount to annuity
The Settlement Plan
Gets defendant out of processAllows time to negotiate Medicare, Medicaid and other liens
Establish QSF
Plaintiff’s attorneys’ fees and costs can be immediately paidDevelop Plaintiff’s financial planEstablish SNT to preserve SSI and MedicaidEstablish MSA to address Medicare’s future interest
During QSF Administration
Distribute funds for purchase of structured settlement and fund the SNT and the MSA
Terminate QSF
Public
benefi
ts
By Pa
tric
k Fa
rber
, Kev
in U
rbat
sch &
Will
iam
Lindah
l
Who needs Special Planning
Minors
Adults who lack capacity
Adults with disabilities• But not all adults with disabilities – persons with
disabilities come in all shapes, sizes as do their disabilities. Only those who meet the definition of disabled for the purpose of public benefit program enrollment require special needs planning
Wards receiving public benefits• Even if receiving public benefits only certain public
benefit programs require planning
Why planning is needed
Why
If a person with a qualified
disability is paying private pay their life
savings will be depleted
unnecessarily
Counted as income in month of receipt
Counted as resource first day
of next month
Loss of SSI generally
acceptable, however loss of Medi-Cal can be
devastating. Oftentimes Medi-
Cal is the only health insurance that will provide the plethora of
medical and community
services needed by the client
Do all persons with disabilities require special needs planning?
Client is receiving (or will be eligible for) SSI or Medi-Cal
Client with disability is so severely disabled that he or she meets the definition of disabled for SSI and Medi-
Cal programs; and
Client with disability lacks capacity or is a minor; OR if
Defining disability
Someone could be substantially disabled in the commonly understood sense (e.g., if the person must use a wheelchair for mobility). However, that individual would not be considered disabled under the SSI or Medi-Cal rules if he or she holds a full-time job and earns a living wage
Defining disability for SSI
“Disability” for an adult is defined as the inability to engage in any “substantial gainful activity” (SGA) due to any medically determinable physical or mental impairment, or combination of impairments, that has lasted or can be expected to last for a continuous period of at least 12 months, or result in death.
“Disability” for a minor is defined as a medically determinable physical or mental impairment or combination of impairments that causes marked and severe functional limitations, and that can be expected to cause death or that has lasted or can be expected to last for a continuous period of not less than 12 months
Public benefit programs
Needs-Based Public Benefits:
Supplemental Security Income (SSI)
Medi-Cal
Entitlement Public Benefits:
Social Security Disability Income (SSDI)
Social Security – Adult Disabled Survivor
Medicare
Other benefit programs
Section 8
Veteran Benefits
Entitlement benefits
If only public benefit programs are SSDI, Social Security, or
Medicare No special needs planning is
required. Although, it may still be
helpful to plan in some circumstances
However, watch out for dual eligible, meaning
that person with a disability receives both
SSDI and SSI or Medicare and Medi-Cal
There is often lots of confusion from the
person with a disability and their families as to what
types of benefits the person receives so
important to investigate
What SSI provides
SSI provides a modest monthly cash grant for food
and shelter to disabled, blind, or aged (65 or older)
personsIn 2011, the SSI
federal government maximum
payment is $674 a month for an
individual
Some States supplement this
amount. For example,
California provides a supplement of $171 a month to
the payment
Eligibility for even $1 of SSI (in most
States) means automatic
eligibility for Medi-Cal
What MediCal can provide
Medi-Cal• Primary medical care coverage, such as doctor visits, diagnostic testing,
emergency services, surgery, hospitalization, prescription drugs, dental services, and optometry services.
• Ongoing care and recovery, such as in-home medical care services, personal care services, occupational and physical therapy, outpatient drug abuse services, nursing facility stays, intermediate care facilities for developmentally disabled individuals, and adult day health care.
• Other medical-related costs, such as medical supplies, durable medical equipment, and transportation for doctor visits
• Provides waiver programs for home and community based services such as the acquired brain injury program or the personal care assistant program which avoids institutionalization
Specia
l
Needs
Trust
s
By Pa
tric
k Fa
rber
, Kev
in U
rbat
sch &
Will
iam
Lindah
l
First party Special Needs Trusts
SNT is the only planning tool that allows Plaintiff to
preserve use of litigation proceeds in the future AND to preserve eligibility for needs-
based public benefits(d)(4)(A) SNTs sometimes
called Litigation SNTs or
Payback SNTs
(d)(4)(C) SNTs sometimes
called Pooled SNTs
Trust Types that preserve government benefits eligibility for
SSI & MediCal 42 U.S.C ' 1396p
Third party Special Needs Trusts
• Funded from funds that do not belong to beneficiary
Individual Special Needs Trust may also be called a (d)(4)(A) trust• Trustee needs to be appointed. Determine who will
hold assets. Pooled Special Needs Trust may also be called a (d)(4)(C) trust• Established & managed by nonprofit association.
Fiduciary acts as advocate for beneficiary.
Individual Pooled
(d)(4)(A) Trusts (d)(4)(C) Trusts
Separate Trusts Master Trust
State specific State specific
Must be under 65 Any Age
No additional funds after 65 Single funding after age 65
Only parent, grandparent, guardian or a court can establish
Individual may establish
Medi-Cal payback Medi-Cal payback
Cost varies and time consuming Low cost and quick setup
Need government agency approval
Need government agency approval
Comparison
What can’t a SNT pay for?
Funds to beneficiary• A SNT should not give cash directly to Beneficiary• All disbursements are made to 3rd parties
Food & Shelter• If SNT pays for food, shelter or medical care already being
provided by SSI or Medi-Cal it will reduce (or eliminate) public benefits.
• Shelter is defined as food, gas, electricity, water, sewer, heating fuel, garbage removal, real estate taxes, rent or mortgageSpecial exceptions
• Sophisticated SNT planners may still authorize such disbursements (if State law allows) with a minimal reduction of SSI eligibility
Funding any SNT by person over age 64
Medi-Cal rule. A person at any age can make a single lump sum transfer
without disqualification. If,
the individual is over age 64 years
of age.
SSI rule. Transfers to SNT will disqualify a
beneficiary for up to 36 months of SSI.
What can a SNT pay for?
Just about anything. For example:Clothing, telephone (cell phone or land line), Internet, television (cable or satellite), hair and nail care, bedding, laundry, furniture, audio equipment, video equipment, computer equipment, adaptive equipment, toys, musical instruments, electronic devices, maintenance of equipment and household, vehicles, improvements and maintenance of such vehicles, newer and more effective medications than allowed by Medi-Cal, more sophisticated medical or dental or diagnostic work or treatment for which funds are not otherwise available, other nonessential medical procedures (such as massage therapy or acupuncture), periodic outings and vacations (and other items to enhance the Beneficiary’s quality of life, self-esteem, or situation), pre-need funeral and burial expenses, and taxes
Which SNT type do I use?
Individual
• You plan to have an individual trust drafted by an attorney• You plan to have funds held by a bank or bonded individual other than yourself• Your ward’s funds exceed bank’s minimum funding requirement
Pooled
• Client is over age sixty four and spend down is not advisable • Spend down is not desirable• You are trying to qualify your client for Medi-Cal & / or SSI• You need to keep costs down. Enrollment/administration of Pooled tend to be
less expensive.
Other
considerations
• Individual or Pooled can by used regardless of the size of the case. Some corporate trustees have funding minimums.
• Will the case be court supervised.
Pooled SNT Trust programs to avoid
Use Individual Trustee
Issue checks themselvesDon’t use
national investment
firm Use proprietary funds
Are not automated
DO NOT USE
What to look for in Pooled SNT Trust provider
Accept Court Supervised Cases, Annuities & MSA’s
Negotiable remainder once state lien paid
Use national investment firms, state chartered banks and strong support counsel
Multi-state footprint – greater fiscal viability
Automations & reporting systems
How does it works
Complete
Application
Submit online
Review Enrollm
ent docume
nts
Consult client & notarize
Overnight
funding &
documents
Welcome
packet & client orientat
ion
Summary
Client must meet disability
requirement to utilize an
Individual or Pooled Special
Needs Trust
Individual or Pooled Special Needs Trusts only protect eligibility for MediCal & SSI
You will still require a court
order to establish an Individual or Pooled Trust
A Pooled Trust MUST be used if client is over age
sixty four
All disbursements must be for the sole benefit of
your client
Eligibility of even $1 dollar of SSI
means automatic eligibility for
MediCal.
Kevin Urbatsch, Esq.
Myers Urbatsch P.C.100 Spear StreetSuite 1430San Francisco, California 94105
Phone: (415) 593-9944Fax: (415) 896-5068Email: [email protected]
State Support Counsel Charities Pooled Trust & Special Needs Expert
Will Lindahl, MBA, CLPF
Enrollment Director for
CPT Special Needs Trust Provider
Direct: 619-800-6492
CPT Email: [email protected]
Contact information
Patrick Farber1301 Dove St. SteNewport Beach, CA 90064
Phone: (949) 833-3910Fax: (949) 833-3687Email: [email protected]
Settlement Expert