Several years ago, Mrs. Schwartz entered a nursing home because she could no longer care for herself in the community. At the time, she was in her early 90s and had used up most of her assets. The nursing home applied for Medicaid on her behalf in order to cover the cost of her care. It was a fairly simple case because Mrs. Schwartz was essentially eligible for Medicaid from the get-go. Her assets were under the then-applicable Medicaid asset limitation (In 2018, that limitation is $15,150 in non-exempt assets).
The problem with Mrs. Schwartz receiving the $500,000 settlement is that she would no longer be eligible for Medicaid because her assets exceed the Medicaid resource threshold
Mrs. Schwartz’s case was simple at the start; however, what took place after her admission added a layer of complexity. Several months later, she scheduled a doctor’s appointment to address some pain in her wrist. Her family arranged for a taxi to transport Mrs. Schwartz to the doctor. On her way to the appointment, another car rammed into the taxi causing serious injuries to Mrs. Schwartz. She was hospitalized for several months with broken ribs, and eventually returned to the same nursing home for rehabilitation and continued custodial care. Mrs. Schwartz’s children initiated a lawsuit against the other driver due to the extreme pain and emotional distress that their mother endured. Ultimately, the case was settled and the driver agreed to pay Mrs. Schwartz $500,000.
While many might think that personal injury law has virtually nothing to do with elder law, the above scenario is a good illustration of why the two areas are sometimes connected. The problem with Mrs. Schwartz receiving the $500,000 settlement is that she would no longer be eligible for Medicaid because her assets exceed the Medicaid resource threshold. In such a situation, an elder law attorney can help with planning that can potentially preserve about half of the individual’s assets. Through a strategy that is often referred to as a gift/promissory note plan, a significant portion of the proceeds may be salvaged.
There are additional issues that must be addressed in a personal injury action. Typically, when the injured individual is permanently disabled, a certain portion of the settlement funds will have to be allocated to Medicare. Over the course of the person’s life, Medicare will have to lay out funds directly attributable to the medical care required as a result of the injury. Accordingly, an elder law attorney will be able to determine if Medicare has a valid lien against any of the proceeds and whether a Medicare set aside is necessary.
If an individual is under the age of 65 and will require nursing care as a result of a personal injury, a trust can be utilized to protect the proceeds from the settlement. If the funds are transferred to a special needs trust, the individual can remain on Medicaid without any penalty or interruption of services. A special needs trust will essentially provide for all of the “extras” for that individual. The trustee of the trust cannot use the funds to pay for any medical expenses, but he/she can use the trust funds for anything else that personally benefits the disabled individual.
Sometimes, an injury is so severe that it results in the incapacity of the injured party. In such a case, a guardianship proceeding may also be in order. A guardianship allows another person to step in and manage the personal and financial affairs of the alleged incapacitated person (“AIP”). The attorney handling the guardianship must be familiar with Medicaid planning and other entitlements that the AIP might need.
It is important to always consider the elder law and special needs planning considerations in the event there is a personal injury action or award.
Ronald A. Fatoullah, Esq. is the founder of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Debby Rosenfeld, Esq. is a senior staff attorney at the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also a partner with Advice Period, a wealth management firm, and he can be reached at 424-256-7273.
By Ronald A. Fatoullah, Esq.
and Debby Rosenfeld, Esq.