Personal Injury Settlements: Crossing the Finish Line

Very often, we find that clients consider obtaining a settlement in a case to be the conclusion of the issues facing them in a lawsuit.  Unfortunately, failing to appropriately plan for a settlement, and how the funds should be allocated can become as fraught with issues as gaining the settlement, itself.  Below are only a few of the basic issues that face an attorney and his or her client when obtaining settlement proceeds, particularly in connection with a personal injury or wrongful death settlement.

Lien resolution

The most common issue facing an attorney in regard to a settlement pool lies in connection with the resolution of various liens, usually from medical providers, insurance companies, Medicare or Medicaid, or from worker’s compensation liens.  Hopefully, during the course of the litigation, from its inception, the attorney and his or her staff will be constantly gathering information relating to the source of these liens, by sending out collateral source letters which require medical and other providers to continually send updated information on the amount and source of funds which the provider will claim from a settlement.  This information is also required if the case is presented to court, in that there is an ongoing issue as to the degree in which all medical expenses claimed by the provider may be presented to the jury, or only the amount that is subject to reimbursement.  Nevertheless, for settlement purposes, liens must be identified and, where appropriate, resolution through negotiation becomes an important aspect of the settlement process.

Structured Settlements 

A structured settlement is a mechanism in which a future periodic payment arrangement is made a part of a personal injury settlement.  Under the Internal Revenue Code, all of the future periodic payments are completely tax-free to the injury victim even though the payments include interest they earn.  Fixed qualified annuities are used as the funding mechanism for a structured settlement, which are normally offered by large insurance companies.  As a flexible arrangement, they can normally be specifically structured to meet a client’s needs.  Although there are many issues when planning to resolve a case through a structured settlement, two of the key considerations that a trial lawyer must be cognizant to not destroy the ability to effectuate such an arrangement are: a) the fact that the funds cannot be constructively received by the client, for example, through the attorney’s acceptance of the funds designated by the structure into the lawyer’s trust account and b) the release language must be specifically formulated with required language for a structured settlement, a uniform qualified assignment must be executed, and the structured settlement annuity must be funded by the defendant with a check made payable to the assignment company.  These are critical  traps for the unwary.  Consequently, the issue of a structured settlement must be decided and planned before any monies are accepted by the plaintiff’s lawyer.

Medicare Set Aside

Medicare is a federal health insurance program.  Simply put, if the client is covered by Medicare, or is likely to become covered by Medicare in the near future (for example, in the next 30 months), the Medicare Secondary Payer Act must be considered.  This Act primarily deals with both Medicare payments that are made prior to the date of settlement and future Medicare payments for covered services.  A Medicare Set Aside is a mechanism under which an injury victim may preserve his or her Medicare benefits by setting aside a portion of the settlement proceeds in a separate account to pay for future Medicare covered services.  These funds can only be used for Medicare covered expenses for injury related care.  The goal is to get the Center for Medicare and Medicaid Services to agree in writing to the Medicare Set Aside and to get them to agree to be responsible for all future Medicare payments once these set aside funds are depleted.  These Medicare Set Asides may be funded through either lump sum or structured settlement proceeds (see above).

Special Needs Trusts 

Special Needs Trusts are designed to help individuals who qualify for Social Security Income (SSI) and Medicaid to receive a settlement amount without disqualifying their eligibility for these programs.  This type of trust provides an injury victim with resources to use to pay for special or supplemental needs while preserving eligibility for these governmental benefits.  Often these Special Needs Trusts are placed into a Pooled Trust for this purpose.  These pooled trust assets are not counted as available resources for the personal injury victim, but can be used for items or services such as medications, non-essential medical care, comfort services, entertainment, electronic equipment and the like.  One consideration, however, is the fact that Medicaid and the Social Security Administration may have a lien on the proceeds that it has paid to the recipient, from the Special Needs Trust, once the trust is no longer viable, such as at the death of the beneficiary.  Again, it is important for an attorney, who has a client that is obtaining significant SSI and Medicaid benefits to consider the alternative of establishing a special needs trust.  Very rarely, however, will the personal injury or civil trial attorney actually be the person who establishes the trust.  Rather, this task will usually be referred to an elder lawyer for assistance, or a settlement services company, such as Synergy Settlement Services,  whose material contributed to this article. If you have a situation requiring legal representation for a personal injury claim, contact Corless Zinober FL personal injury lawyers at 866-969-2889.