Personal Injury Lawyer Virginia Beach
Alex, a 28-year-old cyclist, was biking to work one day when a distracted driver hit him. The accident was severe, leaving him a paraplegic. Now, his financial future is uncertain, and he’s worried about how he will survive and provide for his young family.
As a disabled individual, Alex is likely to qualify for government programs like Medicaid and Supplemental Security Income (SSI). However, if he sues the driver in a personal injury claim and receives a settlement, that settlement may disqualify him from these vital benefits, making him hesitant to file an injury claim.
Is there a way to obtain compensation for the injury without having it disrupt needed government benefits?
In Virginia, personal injury settlements can significantly impact a person’s eligibility for government aid. The state views settlements as income or assets, which can put recipients over the financial limits set by these programs.
Our Virginia Beach personal injury lawyers can help. At Shapiro, Washburn, & Sharp, we know how to use a “special needs trust” to shield your settlement funds from being counted against you regarding government benefits. Call us at 833-997-1774 for a free consultation.
What Is a Special Needs Trust?
A special needs trust (SNT) is a legal arrangement that holds and manages funds for people like Alex with disabilities while protecting their eligibility for government benefits like Medicaid and SSI. The money or other assets are placed into a trust managed by a trustee who oversees the distribution of the funds for the beneficiary’s supplemental needs.
Let’s say Alex is relying on Medicaid to cover the costs of his essential medical equipment and home care after his accident, but he lacks the funds to pay for modifications to his home and vehicle. An SNT would place his settlement money into a trust that he could then use to pay for these supplemental needs.
There are three primary types of special needs trusts:
1. First-Party Special Needs Trust
This is funded with the beneficiary’s own assets, such as a personal injury settlement or inheritance. This type of trust would typically be used in a case like Alex’s. It allows Alex to protect his settlement funds while remaining eligible for government benefits. When Alex passes away, Medicaid may tap the remaining funds to repay the costs they covered.
2. Third-Party Special Needs Trust
This type of special needs trust is set up by someone other than the beneficiary, such as a parent or grandparent, using their own funds. These trusts are often part of estate planning and aren’t typically involved in personal injury cases.
3. Pooled Special Needs Trust
Imagine if Alex was biking with a group of other bikers from his place of employment. When the driver hit him, he hit several of the other riders as well, causing permanent injuries to many of them. A nonprofit organization may set up this type of trust, combining funds from multiple beneficiaries while maintaining separate accounts for each victim. It can be a cost-effective option for individuals with smaller settlements.
How Does a Special Needs Trust Help in a Personal Injury Case?
A special needs trust can help in a personal injury case in the following three ways:
1. Preservation of Government Benefits
As mentioned above, when you set up a special needs trust, you can receive the funds from your injury claim settlement without losing important government benefits like Medicaid and SSI. If Alex places his settlement in a trust, the money is no longer considered a countable asset, allowing him to maintain his benefits.
2. Protection Against Financial Management
A severely injured person may find it challenging to manage a large sum of money, such as that which may be secured in a personal injury settlement. A trustee—often a professional fiduciary or trusted family member—manages the trust and helps ensure the funds are used appropriately. This helps minimize the risk of mismanagement or exploitation. The trustee can also make sure the injured party stays compliant with government benefit rules, avoiding any unintended disqualifications.
3. Enhanced Quality of Life
A severely injured person like Alex can live a much higher quality of life if he can access both the benefits of government programs and his personal injury settlement. He can then use both for things like:
- Transportation, such as a wheelchair-accessible van
- Personal care services or aides
- Recreational activities or vacations that provide emotional and psychological benefits
- Education and training programs for new skills development
In Alex’s case, for example, the trust may allow him to modify his home so he can better take care of himself while also helping him hire an instructor to help him participate in wheelchair basketball. These experiences can help him feel more in control of his future.
Misconceptions About Special Needs Trusts
Special needs trusts are often misunderstood. Here are some common misconceptions and the truths behind them.
The Beneficiary Has No Control Over the Trust
Alex may worry that if he hands over his settlement to a trust, he’ll lose control over it. A quality trustee, however, will communicate effectively with him to ensure the funds are used to fulfill his needs and preferences.
Special Needs Trusts Are Only for Large Settlements
Though this may be true for first-party trusts, modest settlements can benefit from a pooled trust, which can help preserve eligibility for benefits without requiring significant assets.
Setting Up a Special Needs Trust is Too Expensive
Setting up a special needs trust does involve legal fees. The long-term benefits, however, usually outweigh the costs because you’re avoiding the loss of government benefits. Talk to your lawyer about saving your settlement and benefits funds.
How Can a Personal Injury Lawyer Help?
Managing a personal injury case involving disability can be complex. At Shapiro, Washburn, & Sharp, we can help you determine whether a special needs trust may be your best option. We assess your eligibility and then work with estate planning and financial professionals to create a plan that considers your future needs.
Contact us today. We are highly experienced in the law surrounding settlements, government benefits, and trusts. We can help you avoid costly mistakes, as we did for this University of Virginia student who was riding away from her on-campus job when she was hit by a car. We helped secure a $450,000 personal injury insurance settlement for her.
You can find our offices in Virginia Beach, Portsmouth, Hampton, Norfolk, and Chesapeake.