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Protecting Settlement Proceeds

by Ira M. Leff, Esq.

June 16, 2008

Recently, I have been consulted by several long-term care malpractice attorneys about how to protect the settlement proceeds won by the plaintiff who is a nursing home resident and a Medicaid recipient (A/R).  It used to be that the A/R would put the proceeds into a special needs trust or the Georgia Community Trust and the funds could be used to provide for all of A/R's needs not covered by Medicaid.  Since 1993, it has been clear that a special needs trust can only be created for a person under 65.  In Georgia, it was possible to contribute to a community pooled trust for a person over 65 until that policy was clarified in May 2006.  Now it is clear that neither type of trust can be created for a person over 65.

Annuities are another popular settlement option.  However, in Georgia, in order for an annuity to be an exempt resource, it has to be purchased as part of legitimate retirement plan.  So what can the A/R do with his settlement proceeds?

Depending upon the size of the settlement, it may make sense for the A/R to purchase a homeplace.  In one case I am working on the A/R's primary family caregiver is his sister.  A/R could purchase an equity interest in his sister's home and move from the nursing home to the house.  The sister retains an ownership interest in the house and cares for A/R for one year.  After the year at home, A/R can return to the nursing home and can gift the home to his sister without a transfer penalty.  MEDICAID MANUAL § 2342-3. The sister can then use the money paid to her for the house to provide extra care for A/R.

A similar plan can be developed for A/R to transfer a home to a child of his who provides care for A/R in the home for two years.  MEDICAID MANUAL § 2342-3.

Notwithstanding the changes in the trust and annuity rules, there are still ways of protecting and preserving settlement proceeds.  If you have such a case, I will be happy to discuss the options with you.

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