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Getting a Money Settlement While on Government Benefits (Part 3)

                The past 2 weeks I outlined for you the problem of what to do with a money settlement that is received by someone currently on Medicaid.  A special needs trust is the solution most often recited.  But what choices does Joe have?  He is the 70 years old client currently in a nursing home receiving Medicaid benefits that I mentioned last week.

                If Joe has any child that have been deemed disabled by Social Security then an outright transfer to that child or to a trust for the sole benefit of that child can be made.  This transfer will not carry a Medicaid penalty because it falls within the exceptions to Medicaid’s transfer penalty rules.  From there the money can be placed in a trust and used for Joe’s benefit.

                What if Joe doesn’t have a disabled child?  Then he will need to spend the money down but cannot simply transfer it out of his name.  He must spend it on product or services for himself (not others).   There isn’t much he can spend it on in a nursing home but depending on his mental and physical capabilities a cell phone, computer or motorized wheelchair are some common expenses.

                In order to keep his Medicaid benefits uninterrupted, he must spend the money before the next calendar month so as to keep his assets under $2000.  If the funds he receives are too much to spend in one month then he will need to private pay the cost of his nursing home care until he can get his bank account back under $2000 and then reapply for Medicaid.

                Knowing all this before pursuing a claim can be of critical importance to Joe.  Let’s say that Joe is 63 when his personal injury attorney takes his case.  If he knows that he will no longer have the ability to place his money recovery in an SNT once he reaches age 65 and he cannot utilize the disability child exception, then it just might be better for his attorney to push extra hard to resolve the case before his 65th birthday, even if it means taking less money.  After all, if he has to give some or all of it to a nursing home or the State of New Jersey he won’t benefit at all from the extra money.