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5 Points to Consider BEFORE Settling a Personal Injury Claim

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Speak to a special needs planner. The personal injury attorney is highly qualified and he or she has done their best to ensure that the special needs individual has received the maximum settlement for the individual who was harmed. However, it is possible that he or she may not have expertise in settlement planning for a person with a disability, and they may not even be aware that if the settlement funds are disbursed directly to their client, the client may be ineligible for public benefits. The personal injury attorney may not realize that the benefits can be preserved with the right planning, including the possibility of establishing a special needs trust. It is for that reason that a consultation with a special needs attorney prior to any settlement even being discussed is highly recommended so that these concerns can be addressed and planned for accordingly.

Consider lump-sum payments as opposed to structured settlements.  It is very common for personal injury settlements to take the form of a structured settlement.  This usually provides some advantages for both parties.  For the beneficiary, it provides for a continuous series of payments over time, to ensure a steady stream of cash. For the defendant, it allows them to purchase an annuity at a discount, therefore, paying less up front for the settlement. The problem arises if the victim has an immediate need for a lump sum up front for necessary expenses such as modifying their home to accommodate the person’s disabilities or retrofitting an automobile to allow the individual to continue driving with said disabilities. There can also be expenses that aren’t realized up front and if the monthly payments are not sufficient, or there are not enough funds saved a few years down the road to cover these unexpected expenses, there can be issues. In such cases, it may be prudent to take the lump sum up front, place it in a special needs trust and invest with a firm that specializes in special needs trust investments so that it may be accessed in case of emergency, or to consider a hybrid settlement with part being paid up front and part being structured.

Protect public benefits with a special needs trust. Usually, unless the settlement is so large that the funds will not be depleted by medical costs and care, it may be in the individual’s best financial interest to apply for means-tested government benefits, such as Supplemental Security Income (“SSI”) or Medi-Cal, if the disabled person is not already receiving them. To become eligible or to maintain eligibility for such public benefits, one of the best options may be to place the settlement payments into a special needs trust. If drafted correctly and if administered correctly, a special needs trust is designed to hold these settlement assets, allow the beneficiary to still receive benefit of the funds without losing their SSI or Medi-Cal eligibility.

Consider an ABLE account. This could be a good option if the funds received are modest and the disabled person wishes to preserve their government benefits. These accounts are much easier and much cheaper to set up than special needs trusts but they do have different eligibility requirements.  One being that the onset of the disability needed to have occurred prior to the individual’s 26th birthday.

Prepare for the Medi-Cal payback. Medi-Cal may enforce its right to reimbursement for monies they have spent on the beneficiary if there is any settlement money left when the disabled individual passes.

To learn more about how to handle a personal injury settlement in the best possible way, please contact me for a consultation.

Written by: Cara Crownover, Esq.

562-923-0971

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