Protecting Benefits After a Settlement

Programs that depend on financial need, such as Medicaid and SSI, count income and resources. A settlement or trust payment can push you over their limits, which may pause or end benefits until the money is spent down. Programs based on your work history, such as Social Security Disability Insurance and Medicare, generally are not reduced by settlement money in the same way. Some veterans benefits and state programs have their own rules. Make a list of every benefit anyone in your household receives and share it with your lawyer early, so planning can start long before the first payment is issued.

Special needs trusts can hold money for a person with a disability without it counting against certain benefits, but they must be drafted and managed under strict rules, and some require repaying Medicaid later. Pooled trusts run by nonprofit organizations are another option in some states. Some families plan spending on items programs allow, such as paying off a mortgage, making a home accessible, buying medical equipment or arranging a prepaid funeral. What works depends on your age, state and which benefits you receive. An elder law or benefits attorney can compare options before money is deposited into your account.

Medicare, Medicaid, the VA and some private insurers may have a right to be repaid from a settlement for medical care they covered that relates to the illness. These repayment claims are called liens. Your lawyer should identify them, confirm the amounts and often negotiate them down before funds are released to you. Unresolved liens can lead to collection efforts or benefit problems later. Ask your lawyer to explain which liens exist, how much they are expected to be and how much you should receive after fees, costs and liens are paid.

1. 1

   Write down every public benefit your household receives and give the list to your lawyer.

2. 2

   Meet with an elder law or benefits attorney before any settlement money is deposited.

3. 3

   Ask whether a special needs trust or pooled trust fits your age, state and benefits.

4. 4

   Confirm in writing how Medicare, Medicaid and insurance liens will be resolved before accepting payment.