I have $50K from insurance proceeds but I'm on SSI/Medicaid, what should I do??

March 6, 2007 8:23 AM

What can I do to continue recieivng SSI and Medicaid benefits if I received a lump sum insurance proceeds?

I know someone who's elderly and disabled. She is receiving SSI benefits and is on Medicaid. Recently, her husband was involved in an auto accident and he died. The other person involved was wrong and their insurance company paid out a wrongful death benefit to the wife in the amount of $50K.

She has the check but hasn't cashed it yet because she's afraid that it'll make her lose her SSI and/or Medicaid benefits.

I know of 2 options: spend down the money or put it into a "pooled trust." I know the drawbacks of a pooled trust is that you have no control over the dispursement of funds and also, after the death of the wife, the funds are used to payback medicaid.

My questions to the hive are:
1. If she spends down, what would be the best ways to spend down the funds? What should she do with the money to maximize usage (either for her or her beneficiaries when she dies) and also not jeopardize her SSI or medicaid benefits?

2. Would the pooled trust be a better option?

3. Are there any other ingenious ways to shield the $50K?

posted by pikaboy202 to law & government (11 comments total)

Seems like she should talk to an accountant about something like that. They'd be the ones to know about this kind of thing.
posted by mathowie at 9:06 AM on March 6, 2007

She should ask Social Security what to do. Otherwise she risks losing her benefits and paying back whatever benefits she received while she had access to the $50,000.

SSI and Medicaid are poverty programs. You are not entitled to them when you are not impoverished.
posted by BluGnu at 9:16 AM on March 6, 2007

Talk to both the Feds -- regarding SSI -- and the state office that handles Medicaid. They are separate programs, and may have separate rules. We encountered this recently when buying a house and deciding whether or not to put my disabled partner's name on the title. It would have been o.k. with his SSDI and Medicare, but would have screwed his Medicaid.

If there is any doubt, it is worth consulting a lawyer in this person's state who also specializes in these matters.
posted by Robert Angelo at 9:21 AM on March 6, 2007

Understanding Supplemental Security Income - Spotlight on Trusts - 2006 Edition.
posted by ND¢ at 9:31 AM on March 6, 2007

Supplemental or Special Needs Trusts are frequently used to receive an inheritance or personal injury litigation proceeds on behalf of a disabled person in order to allow the person to qualify for Medicaid benefits.
posted by ND¢ at 9:34 AM on March 6, 2007

Generally, a person has 9 months to spend down before being penalized and her benefits can be preserved through a trust, so please ignore BluGnu.

SNT's are used to preserve Medicaid and SSI when a person receives some kind of large payout. The rules for what the trust can pay for are different for the two programs (for instance the trust can pay for shelter costs w/o violating Medicaid rules but paying for shelter costs violates SSI rules). This stuff is complicated, and your friend should contact alocal legal services program for advice. For a list of legal programs she might be eligible for, she should go to www.lawhelp.org where she can search by zip code. Someone who is familiar with Medicaid planning would be the best bet.

IAAL, but Medicaid makes my head hurt, so please do not take this as legal advice.
posted by Mavri at 10:11 AM on March 6, 2007

She really should see a lawyer - look for someone practicing elder law.
posted by dilettante at 10:29 AM on March 6, 2007

Are there any other ingenious ways to shield the $50K?

To say "shield" makes it sound like you are trying to hide it. Hiding assets is illegal. Trying to hide insurance settlements from SSI and Medicaid sets you up for trouble. Transferring resources can create a period of ineligibility for certain medical institution services in the future (nursing home coverage, for example).

Rules will vary by state, but with Medicaid, there are certain resources that may be exempt (e.g., prepaid burials, homestead).

IANAL, and you may need one here. Be very careful with trusts and annunity programs that advertise themselves as bulletproof.

On preview:
Generally, a person has 9 months to spend down does not apply in my state, so be careful.
posted by badger_flammable at 10:32 AM on March 6, 2007

My bad on the 9 month thing; it was a general statement off the top of my head & is only true in some instances (and apparently only in some states). It proves my point that this stuff is very complex, so try to see a lawyer who specializes in this.
posted by Mavri at 11:29 AM on March 6, 2007

SNT's (Special/Supplemental Needs Trusts, or in certain states OBRA trusts) must be irrevocable, will be subject to a Medicaid lien on death of the beneficiary and cannot be established for persons over age 65. They have similar limitations to pooled trusts in terms of how the funds can be used.

You ARE entitled to enter into an SNT or pooled trust in order to preserve medicaid/SSI benefits. To keep benefits you have to strictly limit what the funds can be used for in order to ensure they are not counted as assets for Medicaid/SSI purposes. The effect is that they have to be exclusively for SUPPLEMENTAL medical needs that medicaid would not cover - if they are available for spending-at-will, they will be counted as assets reducing medicaid/SSI contribution. You have a range of choice - if you want to be able to spend this money any ole' way you please, you will lose Medicaid/SSI because you have the asset. If you want to keep Medicaid/SSI, you have to limit the availability of the funds by entering into a strict arrangement grounded in state and federal law as to the permissible ways to spend this money. It's not really a DIY project.

Please see an elder law attorney - I work with SNT's and Medicaid on a daily basis and I can tell you that a good elder law attorney can help you retain at least 1/3 more net funds than you'd normally retain. If you assume that at least $20,000 or more is on the line here, as well as potential tax consequences from any investment of the settlement, weigh that amount of money against the fees for the elder law attorney.

I'm not an elder law attorney, I'm not your lawyer, I don't give legal advice now or ever.
posted by bunnycup at 11:29 AM on March 6, 2007 [1 favorite has favorites]

I, too, spoke off the top of my head and I apologize. I handled the affairs of an elderly aunt and uncle who eventually qualified for Medicaid and I found the people at the state Medicaid office to be most helpful in figuring out what counted as assets for them.

I also worked at a Legal Aid office for 6 years and represented several people who ended up owing the SSA when the SSA believed them to have assets that had not been counted. Once "they" think you have countable assets, it's very difficult to convince them otherwise.

While IAAL, I'm not your lawyer but do urge you to proceed with caution.
posted by BluGnu at 12:29 PM on March 6, 2007