As special needs trust attorneys, our office can play a significant role in personal injury settlements. As a consultant to injury attorneys, we can help navigate the many issues related to: ascertaining whether certain government programs, such as Medicaid or Veteran’s Benefits, will be jeopardized by the settlement; determining and assessing the need to protect Medicare’s interests, including the creation of Medicare Set Aside Arrangements (MSAs); determining and compromising Medicare, Medicaid and other liens; and most importantly, planning, preparing and administering the special type of special needs trust (SNT) used in the context of settlement, sometimes called a (d)(4)(A) or (C) special needs trust or OBRA payback trust.
Our office is experienced in establishing Qualified Settlement Funds (QSFs) pursuant to Internal Revenue Code Section 468B. QSFs arose in the context of class action lawsuits, but their value in injury settlements has proven effective. First and foremost, the QSF buys time for the plaintiff to focus on post-settlement issues, particularly assessing the need for an OBRA payback trust to protect government benefits for the plaintiff, assessing federal estate tax planning strategies and evaluating Medicare’s future right to recovery.
QSFs are attractive to defendants since the QSF allows the defendants to remove themselves from the post-settlement process by paying directly to the QSF Administrator and also allowing the defendant a current year income tax deduction. Plaintiff’s attorney’s fees can be paid immediately from the QSF consistent with court order.
A QSF must be established by court order and all payments must be approved by court order. Payments to the QSF by the defendant are not deemed constructively received by the plaintiff, which allows the plaintiff to consider structured settlements on different terms than may have been proposed by the defendant.
Once all non-settlement issues have been resolved, the funds can be turned over to the plaintiff, paid into an OBRA payback trust or used to buy a structured annuity.