How does a special-needs trust protect my settlement and Georgia Medicaid eligibility?

· 3 min read

Receiving a large injury recovery can paradoxically threaten the very benefits a seriously injured person depends on. Medicaid and Supplemental Security Income (SSI) are need-based programs with strict limits on countable assets and income. A settlement paid directly to the injured person can push them over those limits and cut off coverage. A special-needs trust is the legal tool designed to prevent that result.

How the trust preserves benefits

Need-based public programs look at what a person owns and receives. When settlement funds are placed in a properly drafted special-needs trust (sometimes called a supplemental-needs trust), the assets in the trust are generally not counted as the beneficiary’s own resources, because the beneficiary does not control them outright. A trustee holds and manages the money and pays for goods and services that improve the beneficiary’s quality of life without disqualifying them from Medicaid or SSI.

Federal law authorizes a “first-party” or “(d)(4)(A)” special-needs trust for a person under 65 who is disabled, funded with the person’s own money, such as injury-settlement proceeds. Georgia administers Medicaid within that federal framework, so a trust meeting these requirements is recognized when determining eligibility here. Because the rules are technical, the trust must be drafted to fit them precisely; a defective trust can fail and expose the funds to being counted.

What the trust can and cannot pay for

The trust is meant to supplement, not replace, public benefits. A trustee can typically use trust funds for:

  • Therapies, equipment, and medical care that Medicaid will not cover.
  • Home modifications, accessible vehicles, and personal-care attendants.
  • Education, recreation, and other items that enhance daily life.

Distributions of cash directly to the beneficiary, or payments that the programs treat as income, can reduce or eliminate benefits, so the trustee must follow program rules carefully. A first-party trust also generally must include a provision repaying the state Medicaid agency from any funds remaining at the beneficiary’s death, up to the amount Medicaid paid on their behalf.

Coordinating the trust with the settlement

Because Medicaid and a hospital or insurer may also assert reimbursement rights against an injury recovery, the trust is usually set up as part of resolving the claim, not afterward. Settlement funds can be directed into the trust at the time of payment, and periodic payments from a structured settlement can likewise be routed into it.

The bottom line

A special-needs trust lets a seriously injured Georgian keep a settlement and continue receiving Medicaid and SSI by holding the money outside their countable assets while still funding their care. The protection depends on strict compliance with federal and Georgia program rules, so these trusts are drafted and administered with care to avoid losing benefits.

This article is for general educational and informational purposes only and is not legal advice. It does not create an attorney-client relationship, and Georgia law may change. For advice about a specific situation, consult a licensed Georgia personal injury attorney.

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