This information is for attorneys as it is very technical in nature although all are certainly welcome to read on. While the particular facts discussed below refer to a Massachusetts Medicaid recipient, the law remains the same for anyone in the United States who receives SSI or benefits under their own state Medicaid Program.

A recent MassHealth Administrative Decision forecasts future malpractice claims against the plaintiff’s trial bar.[1]  While I now find most trial attorneys have a basic understanding of Special Needs Trusts (so-called d4a trusts) they really don’t understand the finer points of funding them. Most trial attorneys I speak with are well aware that if their client is on SSI or MassHealth, and the client thereafter receives a Tort or Worker’s Compensation award, the money will disqualify their client from their SSI/MassHealth. Most attorneys know you can call a Special Needs Trust Attorney (me, I hope) and we can deposit the funds into a Special Needs Trust.[2]

However, the ruling in this MassHealth Administrative Decision properly disqualified the client for MassHealth due to a serious error by the client’s attorney. The attorney deposited the tort award into the attorney’s IOLTA account during the time the trust was being drafted and approved by the court. The client was disqualified for MassHealth even though the court eventually allowed the trust to be approved non pro tunc to a date prior to the IOLTA deposit.

THE BIG M is the elephant in the room here.

Unfortunately, M does not stand for Mullen…

These funds should have been deposited into a Qualified Settlement Fund or QSF-more on this later.

These are the reasons why this Attorney made a mistake:

A)           The client had constructive receipt when his money was deposited into IOLTA – this constructive receipt disqualified the client from his MassHealth benefit.[3]

B)      Any money received by the client (the IOLTA deposit) is considered an asset in the second month of receipt; remember the client can only own $2000.00 in assets. Owning more than $2,000.00 disqualified the client from his MassHealth benefit.[4]

C)      Any change in the client’s financial status must be reported to MassHealth within 10 days of the change.  By not notifying MassHealth this disqualified the client from his MassHealth benefit.[5]

So while you know what a Special Needs Trust is, how can you avoid this sure Malpractice situation?

A Qualified Settlement Fund permits the trial attorney to deposit the client’s funds into a Settlement Trust without the client having constructive receipt.[6]  Thereafter, the Special Needs Trust can be prepared and funded.

When you use me to prepare a Qualified Settlement Fund, no money is deposited into IOLTA.  Therefore the recovery award is not an asset of the plaintiff; it is an asset of the Settlement Trust. The plaintiff’s financial status remains the same; that is, under the $2,000.00 threshold.  Accordingly, notification to MassHealth of a change in financial status is not warranted.

The insurance companies actually want plaintiff’s trial attorneys to utilize a Qualified Settlement Fund since once the case is settled, the award can be immediately deposited into the Settlement Trust and taken off their books for accounting purposes. Now we see the plaintiff’s award flows directly from the insurance carrier to the Settlement Trust, and then to the Special Needs Trust without the plaintiff having constructive receipt of the award and therefore not disqualifying him from his benefits.

Therefore, not only can the mistakes described above be avoided, but since the insurance company has deposited the full award into the Qualified Settlement Trust, the trial attorney is able to resolve any existing Medicare/MassHealth (or any  other) liens at his pace. The carrier is protected, since one of the express terms of the trust is that no funds can be paid to the plaintiff until all liens have been satisfied.

By the way, while you negotiate liens at your pace, with the Qualified Settlement Fund, since your fee is not in dispute, you can get paid immediately.

Everyone wins; everyone is fully protected !

If you have disabled clients who receive tort or worker’s compensation awards, call me: Attorney Tom Mullen of Quincy at (617) 770-1050.

Remember, this is a Federal Program.  I can assist you in Massachusetts, or any other State.

I will be your BIG M.

But you can’t wait until after the settlement to telephone me.  You have to notify me before the case settles, or right after you receive a Court decision, since I need two or three months to draft the settlement trust and receive Court approval for its funding.

[1] MassHealth Board of Hearings Decision 1107194 Sept., 2012.  While Administrative Hearings have no precedence, they are accorded great deference. Chevron v Natural Resources 467 U.S. 837, 842 (1984).

[2] Self-Settled Special Needs Trusts are also called Supplemental Needs Trusts.  They were codified at 42 U.S.C. 1396p(d)(4)(a) in 1993.  A tort or workers’ compensation victim is now permitted to have his otherwise benefit-disqualifying award placed into a trust by either his parent, grandparent, or guardian.  If none of these exist, court approval is necessary. There is currently federal legislation pending to permit the plaintiff himself to self-settle his own trust. H.R. 2123 The Special Needs Fairness Act of 2013. This bill needs a lot of support as it’s lost in today’s Congressional acrimony.

[3] The Hearing Officer reported: “…in short, the appellant still owned the funds and did not relinquish her ownership rights simply by placing them in escrow.”  Decision, p. 14. The Board of Bar Overseers in Massachusetts agrees.  Their website states an IOLTA account is for “… money which belongs to clients-such as settlement checks…there is on-demand access to the client’s money…”   There is no doubt this is the rule in every state in the United States.

[4] Social Security Program Operations Manual Systems (POMS) SI 01120.005 B1-2. The U. S. Supreme Court has said since POMS, not being regulatory but rather one of policy, are not given the great deference given them by  Chevron, op cit.; and therefore are not binding; but rather “…constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.”  Skidmore v Swift 323 U.S. 134 (1944).  Having said that, this particular POMS has been tested many times and is well-settled.  (A SSI/MassHealth recipient is actually permitted to own a home, one automobile, furniture, and personal effects.)

[5] 130 C.M.R. 515.008B.

[6] 26 U.S.C. § 468B (I.R.S. Code § 468B) and 26 C.F.R. § 468B-1.  A Qualified Settlement Fund is a trust-a Settlement Trust. It can be used for all class-action plaintiffs, and for all single-claimant plaintiffs. However, the latter cannot avail themselves of structured settlements.

Thomas R. Mullen
Thomas R. Mullen has been an attorney since 1977 and has devoted his practice exclusively to elderlaw since 1988. He is nationally recognized as one of the foremost experts on Medicaid planning. His additional Practice areas include estate planning and trusts for disabled people, as well as assisting attorneys with Medicaid lien allocations and the Medicare Secondary Payer Act. In the Spring 2013 issue of the National Academy of Elder Law Attorneys (NAELA) Journal, Attorney Thomas R. Mullen of Quincy, Mass. was described by the Academy’s Massachusetts past president and law professor William J.Brisk as being “a prominent and innovative elderlaw attorney.”