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Special Needs Trusts, Custodial Accounting, and Medicare Set Asides

Specific Solutions

The use of Custodial Accounts and Special Needs Trusts offer comprehensive administration and peace of mind at the end of a complex settlement process. Their use will eliminate administrative errors and provide clear accounting for the funding of final settlements.

An effective and affordable way of administering a significant final settlement includes a Medicare Set Aside (MSA) or other Custodial Account. This type of custodial account facilitates the management and funding of the medical settlement amount consistent with the way the parties would administer payments, and should be considered in all situations. There are several funding options for the account, the most common of which are:

  • Full cash value of the MSA or other settlement amount, or
  • Approved seed money of the MSA or other settlement amount, complimented by a fixed income stream funded via a structured annuity.

A professionally managed custodial account protects future medical insurance coverage and benefits by administering the time consuming task of validating and paying the correct expenses. The account is managed to ensure funds are utilized only for the intended purposes, which eliminates the exposure of administration for all parties.

In Workers' Compensation and Liability settlement cases, the agreement of all parties (claimants, insurers, attorneys and Medicare) often falls short of its intended purpose. This has resulted in no standardized and secure means of managing and reporting the MSA or other settlement fund usage to ensure compliance with the required provisions.

Assistance for Claimants, Insurance Companies, and Medicare

By establishing a Custodial Account, immediate value is created for all parties including:

  • Maintaining benefit eligibility;
  • Providing guidance for use of MSA and other settlement funds;
  • Removing the burden of reporting;
  • Providing peace of mind because the claimant is provided with a trusted resource to manage future care and avoid post settlement liability;
  • Insuring the approved allocated funds are used for their intended purpose, and;
  • Providing a uniform method to comply with disbursement and reporting obligations, as well as protecting ongoing entitlement to Medicare.

Along with a Custodial Account, Special Needs Trusts are important to consider while you are negotiating a final settlement. They allow all parties to be certain that the funds are managed appropriately according to the requirements of the Medicare Act, as well as other components of the settlement. The following trusts are the most commonly used for Liability and Workers Compensation matters.

Liability Reversionary Trusts

In catastrophic injury cases requiring ongoing future medical management, often a component of the structured settlement will include a medical trust with a "reversionary" (rights to remainder interest) feature. Essentially, a fund is set up to cover anticipated (and certain unanticipated) medical expenses over the plaintiff's lifetime. This fund is generally in the form of an irrevocable trust managed by a bank or insurance company, with a third-party claims administrator retained for medical bill processing according to the terms of the trust agreement.

Funded with an initial cash deposit, an annuity stream of income is directed to the trust to offset ongoing expenditures and inflationary pressures over time. Typically, a Life Care Plan together with a Capital Needs Analysis is prepared to assist in determining the appropriate amounts to deposit into the trust. The results of negotiations will dictate the terms of the trust agreement and benefits payable, including the reversion of the trust and annuity when the trust beneficiary dies.

Workers Compensation Medicare Set-Aside Trusts

When settling the medical expense portion of a workers compensation case, consideration must be given to Medicare pursuant to the "Secondary Payor" and other statutory rules.

For example, compliance with the terms of the Medicare Act can be accomplished by depositing cash or periodic payments in a Medical Set-Aside Trust equal to the present value required to adequately fund all future medical expenses. The Trust provisions contemplate and match the Medicare issued guidelines with respect to the criteria by which a Set-Aside arrangement reasonably considers Medicare's interests. The results of negotiations will dictate the terms of the trust agreement and benefits payable, including the reversion of the trust and annuity when the trust beneficiary dies.

By using Custodial Accounts and Special Needs Trusts for Liability and Workers Compensation cases, all parties will receive comprehensive administration and peace of mind for the proper utilization and administration of the funds.

How do I get started to refer a Special Needs Trust and/or Custodial Accounting Solution request?

The easiest way is to call us at 585-586-4530 and have one of our representatives help you. Another way is to click below to contact us:

Click Here for Our Online Contact Us Form.

We are dedicated to serve you with our outstanding team of risk, claim, medical, and legal practitioners to provide you the best Special Needs Trust and Custodial Accounting in a timely manner. Call us today to see what a difference we can make for your most difficult claims.

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