When is an Exempt Trust under 42 U.S.C.(d)(4)(A) or (C) Not the Right Choice or the Only Choice to Hold Proceeds from an Injury Settlement When Medical Technology Intersects with Health Care Decision Making

Special Needs Trusts and Recoveries under the Federal Tort Claim Act

When settling an injury case for a client who has a disability, it is important to consider whether a proposed settlement should be transferred to an exempt trust pursuant to 42 U.S.C. 1396p (d)(4)(A) or (C) in order to protect the client’s eligibility for needs based government benefits, such as Medicaid or Supplemental Security Income (SSI).

Part of the analysis involves whether the exempt trust adds any value.  Recoveries for personal injuries under the Nursing Home Care Act, 210 ILCS 45/3-605, are exempt from the Medicaid lien and consequently an exempt trust may add no value.   A recovery under the Federal Tort Claims Act must also be treated differently.  Currently, the Federal Tort Claims Office is not permitting a Reversionary Trust to be drafted as an eligible exempt trust for SSI/Medicaid purposes.  The Reversionary Trust is designed to hold that part of the settlement related to future medical needs related to the injury.   Only the Federal Government can receive the balance in the Reversionary Trust at the death of the injured party.

In settling this type of claim, assuring proper allocation of other damages, such as pain and suffering, loss of consortium, be set aside as a separate award and not commingled in the Reversionary Trust Is critical.    The Special Needs Trust Attorney can also aid in negotiating the terms of the Reversionary Trust beyond those contained in the government’s model trust form.

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