preserving_elder_benefits_ssi_medicalAs published:  Consumer Attorneys Of California – FORUM – November/December. By Patrick C. Farber, Kevin Urbatsch & William E. Lindahl

Plaintiff attorneys face unique challenges when serving the needs of the injured elder population – those over the youthful age of sixty-four.

One difficult issue is that many elders qualify for and utilize needs-based public benefits like Supplemental Security Income (SSI) and Medi-Cal. Typically, attorneys use special needs trusts (sometimes called (d)(4)(A) SNTs or Payback SNTs) when creating settlements for their injured clients. However, under federal law, these SNTs cannot be used by individuals over age 64 without disqualifying the injured parties from receiving public benefits. (See, 42 U.S.C.§1396p(d)(4)(A).)

Avoiding Loss of Needs-Based Public Benefits

The potential loss of needs-based public benefits significantly impacts the decision to proceed with an injury case for individuals 65 and older. Is it possible to mitigate the impact of the loss of public benefits of the elder client? The short answer is yes, although, depending on the facts of the case, the mitigation may be total or only partial.

An important criteria for public benefits eligibility directly affected by a litigation settlement is the “resource” or “asset” requirement. To be eligible for either SSI or Medi-Cal, an individual is only allowed to own up to $2,000 in assets ($3,000 per couple). (20 C.F.R. § 416.1205, 22 Cal. Code Regs. §§ 50419-50420.) Thus, if a settlement is obtained for an elder client receiving SSI or Medi-Cal, that client will lose much-needed public benefits unless the settlement is placed into a qualifying special needs trust.

Pooled Special Needs Trusts

The only type of SNT available for the elder client is a Pooled Special Needs Trust (Pooled SNT) as authorized by 42 U.S.C. § 1396p(d)(4)(C). Although a Pooled SNT can be used for an individual of any age, it is the only type of special needs trust that can be used for an individual age 65 or older.

Using a Pooled SNT allows the plaintiff to maximize the benefit from a settlement. The Pooled SNT enhances the quality of life of the plaintiff through direct payment for goods and services that make the elder’s life more enjoyable while still being able to utilize Medi-Cal to pay for health care costs. This is nearly always preferred over the alternative – having the elder paying for private healthcare coverage, which may quickly dissipate the entire settlement.

The Pooled SNT can generally make disbursements for anything not illegal or against public policy. However, disbursements from the trust for food, shelter or medical costs already being paid for by Medi-Cal may affect the elder’s SSI and

Medi-Cal eligibility. A Pooled SNT trustee will be able to provide advice on the best way to make these disbursements. The golden rule for disbursement from any Pooled SNT is that funds must be for the “sole benefit” of the trust beneficiary.

This means that direct disbursements (or gifts) to children or spouses are not permitted. The disbursement must be for the elder/plaintiff only. With proper guidance and planning, elder plaintiffs will benefit greatly from the Pooled SNT.

A Pooled SNT is similar to the (d)(4)(A) SNT or Payback SNT except it must be established and managed by a charity for individuals over age 64. The individuals themselves can join an existing Pooled SNT. A Pooled SNT uses a single master trust document for all enrollees verses a separate trust for each client. The client enrolls in the trust via a Joinder Agreement, which addresses the special needs of the specific client and outlines the services provided by that particular Pooled SNT program. In addition, by statute, the charity must have a remainder, beneficial or contingent interest in the trust. In other words, the charity is required to receive some of the remaining assets once the trust is terminated. In addition, if there is a remainder interest after the charity receives its share, any Medi-Cal benefit received by the elder/plaintiff must be repaid when the trust is terminated.

Selecting a Pooled SNT

When selecting a Pooled SNT program, select one that allows for a negotiated remainder interest. Another important consideration is that the Pooled SNT be  allowed to hold a Medicare Set-Aside Arrangement (MSA) in the Pooled SNT to further assist in protecting Medicare’s future interest in personal injury cases.

The reason is that if a MSA is not held inside a special needs trust, its assets will count against the $2,000/$3,000 resource limitation for Medi-Cal. If held in the Pooled SNT, it will protect both Medi-Cal and Medicare eligibility.

Funding a Pooled SNT for any individual age 65 or older can only be done once via a lump sum to reserve eligibility for Medi-Cal that pays skilled nursing  facility costs. If the only Medi-Cal being received by the elder/plaintiff is community- based Medi-Cal, eligibility will not be affected by the funding. If however, the elder/plaintiff is in a nursing home (or may be in one soon), the current policy is that the  Department of Health Care Services (DHCS) will not impose any penalty for an initial transfer to a pooled trust even for a beneficiary age 65 or older. (See 22 Cal. Code Regs. § 50489.9(a)(4).) However, if the  same person augments the trust with additional assets, the transfer would trigger disqualification. (See  22 Cal. Code Regs. § 50489.9(c).)

There is also concern that if the elder/plaintiff transfers assets to the Pooled SNT, the elder may lose up to 3 years of eligibility for SSI. (See 42 USC § 1382b(c)(1)(C)(ii)(IV).) These issues should be carefully considered when deciding whether to use a Pooled SNT and the effect it will have on the elder/plaintiff.

A great deal of caution should be exercised when selecting a Pooled SNT provider. You should assist with the selection of an appropriate Pooled SNT. Consider the following when selecting:

• Verify the program accepts court-ordered trusts;

• Verify the program uses a corporate trustee for oversight;

• Negotiate annual trust administration fees;

• Negotiate the remainder interest to the charity;

• Petition the court to waive annual accountings (acceptance varies from county to county).

A word of caution: You cannot avoid Medi-Cal payback once the trust is terminated.

Currently, the California Charities Pooled Trust ( .org), working with Fremont Bank in San Francisco, provides a Pooled SNT program statewide that addresses the above issues. The Charities Pooled Trust accepts court-ordered trusts of any size. It will also negotiate the remainder interest and trust administration costs based on case dynamics.

With longer life expectancies, more and more injured plaintiffs will face these complicated and often confusing public benefits/settlements issues. It is up to you to help you clients navigate through the maize of laws and regulations so that your clients can live out their lives with peace of mind and financial security.

About the Authors

Patrick C. Farber is a structured settlements broker in California. He specializes in settling medical malpractice, physical injury, non-physical injury, product liability, workers’ compensation, mass torts, punitive damages, employment and elder abuse cases with structured settlements in court hearings, arbitrations and settlement conferences. 800-734-3910,

Kevin Urbatsch is principal of  Myers Urbatsch, P.C. in San Francisco. He is a Certified Specialist in Estate Planning, Probate and Trust Law by the California State Bar Board of Legal Specialization. He is a nationally recognized expert on special needs and settlement planning law for elders,  minors and persons with disabilities. 415-593-9944,

William E. Lindahl, MBA, CLPF is principal of Fiduciary Matters in the San Francisco Bay Area. He is a California Licensed Professional Fiduciary with 25 years experience meeting the needs of the disabled. He has developed Pooled Trust programs nationwide and online trust administration systems. He has spoken nationally on trust administration, Medicare and Medicaid fraud. 619-800-6492,