Why Protect Funds?
When people receive settlements, the money can often dissipate quickly. Business deals appear interesting, big purchases seem affordable, friendly loans look harmless. People often feel they can afford to be generous and experimental. All too often, however, this results in the settlement being depleted, leaving them with insufficient funds and unable to work or provide for their family.
Assura: The Settlement Trust Experts
Many trust companies work with conventional trust clients and seldom serve settlement beneficiaries. Assura Trust is different: we focus specifically on serving people who are settling personal injury claims. This allows us to deliver a higher level of service to our clients—one that produces more finely-tuned, comprehensive, and innovative support.
We also operate with a more personal and flexible style of service than you will typically experience at large national banks or local community bank trust departments. Assura Trust is an office of Midwest Trust Company, a Kansas-based firm with assets exceeding $13 billion. Headquartered in Denver, we work with consultants across the country to serve you quickly and comprehensively.
SETTLEMENT MANAGEMENT TRUST
What is a Settlement Management Trust?
A Settlement Management Trust (SMT) is a protected account designed to hold, manage and distribute money received from a personal injury settlement. Its primary purpose is to protect and preserve the funds for the exclusive benefit of the person being compensated—the trust “beneficiary”—according to his/her needs. Trusts such as our Settlement Management Trusts are proven legal arrangements which place a part of the settlement proceeds safely within the care of a fiduciary whose job is to conserve the funds for the beneficiary only.
Using a trust as a component of a settlement ensures that the beneficiary has money for needs well into the future. At Assura Trust, we bring financial expertise and familiarity with the situation to a wide range of specialized services that deliver the kind of help money alone cannot provide.
We recommend Settlement Management Trusts in situations where future expenses are anticipated, but timing may be uncertain—such as with medical procedures, counseling, some educational needs, welfare, and support—and thus fall outside the spectrum of fixed, periodic payments. We also recommend them in situations where lack of future funds would make life particularly difficult, such as when full recovery is unclear, or when beneficiaries face new challenges like finding employment. Minimum Funding: $100,000
How a Settlement Management Trust Works
Money from a settlement is deposited into a settlement trust. The proceeds may only be withdrawn for the purposes stated in the written Trust Agreement. A Trustee is appointed from the trust company to ensure that the beneficiary’s needs and interests, both present and future, come first. Trustees are fiduciaries, and therefore are legally responsible for managing and investing all trust property for the beneficiary and ensuring that expenditures are made in compliance with these guidelines.
Typically, a trust provides for the beneficiary’s necessities like healthcare, education, welfare, comfort, and support. But they may also assist the beneficiary in such things as the purchase of a home, or a motor vehicle— or to help fund private school, music lessons, or even travel.
Settlement Management Trusts are often wisely paired with tax-favored structured settlements to increase after-tax returns and to reduce the risk of depletion over the long term. Consultants draw from our range of financial tools to facilitate comprehensive settlements that bring both long-term stability and flexibility to a beneficiary’s life.
SPECIAL NEEDS TRUST
What is a Special Needs Trust?
A Special Needs Trust is a tool to maximize all benefit sources available to a severely injured party at the time of settlement of a personal injury claim. This is accomplished by preserving the plaintiff’s eligibility for Medicaid and Supplemental Security Income (SSI) by segregating the settlement proceeds into a trust for medical and non-support elements of care not covered by these Government programs. Settlement proceeds such as structured settlement annuities and the Growth Structured Settlement may be established to pay into the Special Needs Trust to help add asset diversification and tax savings.
Funding requirements for Special Needs Trusts are generally $500,000; however, exceptions may be granted. Please contact the Assura Team to discuss.
Third-Party vs. First-Party Special Needs Trust
When to Consider Special Needs Trusts
Special Needs Trusts are primarily used in cases where the settlement proceeds may not be sufficient to cover all future expenses of the injured party or when the injured party qualifies for SSI and Medicaid Benefits.
The injured party must show that:
- He/she has a substantial long-term disability.
- He/she is likely to have special needs that will not be satisfied without the additional assistance of the trust.
- The amounts going into the trust are reasonably necessary to meet his/her special needs.
A properly established Special Needs Trust will allow these discretionary disbursements to be made without such being treated as income, or the trust treated as a resource, for Government program eligibility.
How to Establish Special Needs Trusts
Special Needs Trusts are primarily used in cases where the settlement proceeds may not be sufficient to cover all future expenses of the injured party or when the injured party qualifies for SSI and Medicaid Benefits (assets less than $2,000 and limited income from all sources).
- The decision to establish a Special Needs Trust should be made before any settlement proceeds are paid to the injured party.
- The Settlement Consultant should contact Assura Trust Company as soon as the settling parties believe there might be a need for a trust.
- The settlement agreement should include the funding amount for the trust, the correct name of the trust, and the direction of payments for any structured settlement annuity or Growth Structured Settlement payments that may pay into the trust. The cash portion that seeds the trust can provide for any immediate needs, while the periodic payments can provide lifetime non-taxable income to the trust.
- The trustee shall have the sole discretion regarding disbursements from the trust; the injured party shall have no direct control over disbursements to prevent the trust payments from being considered income or a resource to the injured party.
- It is important to have a trustee or trustee committee that understands the injured party’s needs.
- The trust cannot provide items considered necessities, such as food, clothing, and shelter. It can only be used to supplement, rather than support, the injured party’s care and quality of life.
- The trust can provide for medical treatment and non-support items not covered by Medicaid, such as experimental drug therapies, additional physical therapy, increased levels of attendant care, special equipment, and other enhancements to improve the quality of life for the injured party.
Advantages of the Special Needs Trusts to the Injured Party
- Maximize all possible resources to provide for the future care of the injured party.
- Preserve the injured party’s eligibility for Government funding sources such as Medicaid and Supplemental Security Income.
- Provide the availability of additional funds to cover those medical and non-support expenses that are not covered by these Government programs.
- Protect the injured party from having settlement proceeds become a direct offset to funds available through Government programs.
Special Considerations
- All outstanding Medicare and Medicaid liens must be either satisfied or compromised and released before the Special Needs Trust can be funded from settlement proceeds.
- The OBRA ’93 Regulations state that any amounts remaining in the Special Needs Trust upon the death of the injured party must first go to the State “up to an amount equal to the total medical assistance paid on behalf of the individual under a State Plan (Medicaid)”.
MINOR'S PROTECTION TRUST
Courts across the country recognize the necessity to protect funds for children and incapacitated adults and often recommend trusts. Trusts are especially helpful to beneficiaries in cases involving children and incapacitated adults because they eliminate the need for continuing court supervision over expenditures, which is usually required if a guardianship of the estate is established. This greatly simplifies the process for a beneficiary.
Trusts for minors may be designed to simply hold funds until they reach the age of majority, or they might permit expenditures sooner for such things as tutoring or educational opportunities. After beneficiaries reach the age of majority, trusts can help protect assets from business disputes, divorce, or creditor claims. Minimum Funding: $100,000
How a Minor’s Protection Trust Works
After court approval, money from a settlement is deposited into a Minor’s Protection Trust. The proceeds may only be withdrawn for the purposes stated in the written Trust Agreement. A Trustee is appointed from the trust company to ensure that the beneficiary’s needs and interests, both present and future, come first. Trustees are fiduciaries, and therefore are legally responsible for managing and investing all trust property for the beneficiary and ensuring that expenditures are made in compliance with these guidelines.
Typically, a trust provides for the beneficiary’s necessities like healthcare, education, welfare, comfort, and support. But they may also assist the beneficiary in such things as the purchase of a home, or a motor vehicle— or to help fund private school, music lessons, or even travel.
Minor’s Protection Trusts are often paired with tax-favored structured settlements to increase after-tax returns and to reduce the risk of depletion over the long term. Consultants draw from our range of financial tools to facilitate comprehensive settlements that bring both long-term stability and flexibility to a beneficiary’s life.
- The Settlement Consultant should contact Assura Trust Company as soon as the settling parties believe there might be a need for a trust.
- The Court Order and settlement agreement should include the funding amount for the trust, the correct name of the trust, and the direction of payments for any structured settlement annuity or Growth Structured Settlement payments that may pay into the trust. The cash portion that seeds the trust can provide for any immediate needs, while the periodic payments can provide lifetime non-taxable income to the trust.
TRUSTS FOR MEDICARE SET-ASIDES
A Medicare Set-Aside (MSA) is an interest-bearing account, such as a trust account, which is either professionally administered or self-administered, that holds the funds to pay for future medical and drug expenses that would otherwise have been covered by Medicare.
Centers for Medicare and Medicaid Services (CMS) recommends that parties to a settlement set aside funds, known as Medicare Set-Aside Arrangements for all future medical and/or prescription drug services related to a Worker’s Compensation injury or illness/disease that would otherwise be reimbursable by Medicare. In essence, the MSA effectively acts as “primary coverage” for injury-related treatment post-settlement. Once the funds are properly depleted, Medicare becomes the primary payor. Minimum Funding: $100,000
Considering Medicare’s interest involves (a) establishing an adequate amount in a set-aside account or trust and (b) establishing an acceptable administering mechanism (professionally- or self-administered). Medicare advises that a Medicare Set-Aside allocation should be included in the settlement agreement on any Workers’ Compensation case in the following situations:
- the claimant is already on Medicare and the total settlement is $25,000 or greater,
- the claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and,
- the anticipated total settlement amount for future medical expenses and disability / lost wages is expected to be greater than $250,000.
When the Workers’ Compensation case settles, the Medicare Set-Aside account becomes the first payor for Medicare-covered expenses. If the account or trust is exhausted, Medicare will assume the role of primary payor for Medicare-covered expenses. Medicare Set-Asides may also be established for liability cases where the individual meets the above criteria.
Money from a settlement is deposited into a trust for the Medicare Set-Aside. The proceeds may only be withdrawn for the purposes stated in the written Trust Agreement. A Trustee is appointed from the trust company to ensure that the beneficiary’s needs and interests, both present and future, come first. Trustees are fiduciaries, and therefore are legally responsible for managing and investing all trust property for the beneficiary and ensuring that expenditures are made in compliance with these guidelines.
Assura Trust partners with several leading Medicare administrative companies to pay for medical bills associated with their claim directly so that claimants can focus on adjusting to life after an injury.
MEDICAL CARE TRUST
For individuals who have recurring medical needs, a Medical Care Trust is a personalized trust for beneficiaries needing medical services tailored to their unique needs while maintaining flexibility for potential procedures, counseling, physical therapy, and other recurring healthcare costs throughout their lives. The Assura Team can also work with beneficiaries’ doctors, nurses, caregivers, and others to help coordinate the beneficiaries’ various services in order to best meet their needs. Minimum Funding: $100,000
How a Medical Care Trust Works
Money from a settlement is deposited into a Medical Care Trust. The proceeds may only be withdrawn for the purposes stated in the written Trust Agreement. A Trustee is appointed from the trust company to ensure that the beneficiary’s needs and interests, both present and future, come first. Trustees are fiduciaries, and therefore are legally responsible for managing and investing all trust property for the beneficiary and ensuring that expenditures are made in compliance with these guidelines.
Typically, a trust provides for the beneficiary’s necessities like healthcare, potential procedures, counseling, physical therapy, and other recurring healthcare costs throughout their lives.
Medical Care Trusts are often paired with tax-favored structured settlements to increase after-tax returns and to reduce the risk of depletion over the long term. Consultants draw from our range of financial tools to facilitate comprehensive settlements that bring both long-term stability and flexibility to a beneficiary’s life.
