FAQ

FAQs

What Are Structured Settlements? Structured settlements are an innovative method of compensating injury victims through the use of annuities. Encouraged by the U.S. Congress since 1982, a structured settlement is a voluntary agreement between the injury victim and the defendant for future periodic payments. With a structured settlement annuity, the injury victim doesn’t receive compensation for his or her injuries in one lump sum. Rather, he or she receives a stream of tax-free payments tailored to meet future medical expenses and basic living needs. A structured settlement may be agreed to privately (for example, in a pre-trial settlement) or it may be required by a court order, which often happens in cases involving minors. Who Determines the Amount of Payments and the Payment Schedule? In any physical injury case, the plaintiff and defendant negotiate issues such as the victim’s medical care, basic living and family needs. Oftentimes, one side (or both) will bring in an expert, such as a structured settlement planner, who provides calculations on the long-term cost of these needs. When there is an agreement on the amount of damages due to the injury victim (which can happen before, during or after a lawsuit), the victim can select a periodic payment plan that meets his or her needs, and the defendant will agree to make the future payments via a structured settlement. The defendant then assigns this obligation to an experienced third party, a life insurance company that funds the damage payments with an annuity. What Kind of Flexibility Do I Have in Setting Up a Structured Settlement? Structured settlement annuities are exceptionally flexible and can be designed to meet virtually any set of needs. A relatively simple payment schedule can be set up that provides for equal payments at set intervals – for example, every month for 20 years. Yet payments need not be in equal amounts. Someone who will need a new wheelchair every three years might elect to receive a larger payment every 36 months to help defray the cost. (This would presumably be in addition to the regular payments.) Structured settlements inherent flexibility means that they are well-suited to compensate people for a wide variety of injuries. Your attorney or a Synergy Settlement Consulting planner will be able to explain additional details as the apply to your case. Are Structured Settlements More Likely To Be Used In Certain Types Of Cases? Structured settlements can be ideally suited for many types of cases, including: Persons with temporary or permanent disabilities Guardianship cases that may involve minors or persons found to be incompetent Workers’ compensation cases Wrongful death cases where the surviving spouse and/or children need monthly or annual income Severe injury, especially with long-term needs for medical care, living expenses and support of family Independent surveys show that the more serious the injury, the greater the likelihood that a structured settlement will be used. I’m Involved In A Lawsuit Now. Why Should I Consider A Structured Settlement? The tax-free payments from a structured settlement can: Relieve the financial pressures of medical expenses and living needs Meet long-term rehabilitation or permanent care facility expenses Provide for the future cost of college funds, retirement down payment on a home, or mortgage payment Provide enhanced protection of the recovery from creditors and predators Provide long-term financial security What Are The Advantages Of A Structured Settlement Over A Lump-Sum Payment? A long-term structured settlement has several advantages. First, there is security. A structured settlement provides guaranteed long-term income. That gives the victim or the victim’s family the ability to recover without spending time and resources determining investment strategies. Second, structured settlement recipients avoid the possibility of a financial loss due to poor investment choices. Structured settlements provide a secure, lowrisk source of compensation and the convenience of regular payments tailored to fit the victim’s specific needs. Third, when Congress amended the federal tax code to encourage structured settlements, it explicitly provided that 100 percent of every structured settlement payment would be exempt from federal and state income taxes. There are many other benefits as well. The victim avoids the risk of mismanaging his or her settlement proceeds. It is widely believed, although not proven, that almost a third of accident victims completely dissipate their judgments or settlements within a few months of recovery, and most spend it all within five years. Structures can offer rates of return that are competitive with other investments. Finally, using a structured settlement, you can avoid the risk of outliving your recovery by transferring the risk to a secure financial institution with experience in this field.
How can my Pooled Trust Funds be used? What can I purchase with my funds? State Medicaid rules and federal law are used to determine what is categorized as allowable, discretionary, non‐support or supplemental, special needs. Monies from the Trust are never used for support, maintenance or primary medical. The Settlement Solutions National Pooled Trust is designed to allow money to be put aside for the supplemental needs of a person with a disability.
Primary Rules The request must be for the sole benefit of the trust beneficiary The trustee can’t give the trust beneficiary cash

The following examples are not all inclusive, but illustrate the types of special, supplemental, nonsupport disbursements that are appropriate for the Trustee to make on behalf of the trust beneficiary. Personal Services: Cable TV, cell phone, internet, maid, insurance, transportation, entertainment, pet grooming, travel expenses, rehabilitation, tuition, music lessons, massage, seminars, movies, sporting events Personal Care: Hair care, eye and dental care, attendant care Professional Services: auto repair/maintenance, attorney/accountant/financial planning fees, home modifications/home improvements related to disability Goods: Vehicles, clothing, furniture, television/stereo, mattress/box springs, eyeglasses/contacts, vacations, hobby supplies, toys, essential dietary needs, computers/software, pets/pet supplies, prepaid funeral expenses (Amount varies by state), washer/dryer, musical instrument, household products, tools/supplies, kitchen appliances, outdoor grill, games, school tuition, gasoline, household appliances Remember: The Trust can purchase any good and service that adds to the trust beneficiary’s quality of life, and are not paid for by public benefits. Caution: this list is just a guide; each state has differences in what they allow from your trust. NON‐EXCLUSIVE LIST OF PERMISSIBLE TRUST DISTRIBUTIONS
  1. Automobile/Van
  2. Accounting services
  3. Acupuncture/Acupressure
  4. Appliances (TV, VCR, stereo, microwave, stove, refrigerator)
  5. Bottled water or water service
  6. Bus pass/public transportation costs
  7. Camera, film, recorder and tapes, development of film
  8. Clubs and club dues (record clubs, book clubs, health clubs, service clubs, zoo, advocacy groups, museums)
  9. Computer hardware, software, programs, and Internet service
  10. Conferences
  11. Courses or classes (academic or recreational) including supplies
  12. Curtain, blinds, drapes, and the like
  13. Dental work not covered by Medicaid, including anesthesia
  14. Down payment on home or security deposit on apartment
  15. Dry cleaning and/or laundry services
  16. Elective surgery
  17. Fitness equipment
  18. Funeral expenses
  19. Furniture, home furnishings
  20. Gasoline and/or maintenance for automobile
  21. Haircuts/salon services
  22. Holiday decorations, parties, dinner dances, holiday cards
  23. Home alarm and/or monitoring/response system
  24. Home improvements, repairs, and maintenance (not covered by Medicaid) including tools to perform home improvements, repairs, and maintenance by homeowner
  25. House cleaning/maid services
  26. Insurance (automobile and/or possessions)
  27. Laundry service or washer/dryer
  28. Legal fees/advocacy
  29. Linens and towels
  30. Massage
  31. Musical instruments (including lessons and music)
  32. Non-food grocery items (laundry soap, bleach, fabric softener, deodorant, dish soap, hand and body soap, personal hygiene products, paper towels, napkins, Kleenex, toilet paper, any household cleaning products)
  33. Over-the-counter medications (including vitamins and herbs, etc.)
  34. Personal assistance services not covered by Medicaid
  35. Pet and pet supplies, veterinary services
  36. Physicians specialists if not covered by Medicaid
  37. Private counseling if not covered by Medicaid
  38. Repair services (appliance, automobile, bicycle, household, fitness equipment)
  39. Snow removal/landscaping/lawn service
  40. Sporting goods/equipment/uniforms/team pictures
  41. Stationary, stamps, cards, etc.
  42. Storage units
  43. Taxicab
  44. Telephone service and equipment, including cell phone, pager, etc.
  45. Therapy (physical, occupational, speech) not covered by Medicaid
  46. Tickets to concerts or sporting events for beneficiary (and an accompanying companion)
  47. Transportation (automobile, motorcycle, bicycle, moped gas, bus passes)
  48. Some Utility bills ( such as direct TV, cable TV, phone)
  49. Vacation (including paying for personal assistance to accompany the beneficiary)
  50. Clothing
EXAMPLES OF TRUST DISTRIBUTIONS THAT WILL REDUCE/ELIMINATE SSI BENEFITS
  1. Paying for basic shelter-related expenses
  2. Paying for food
  3. Cash distributions to the beneficiary
  4. Paying for a service already paid for by another source
  5. Distribution not for the beneficiary (i.e., made primarily for the benefit of another person)
What Is A Special Needs Trust? The primary purpose of creating a Special Needs Trust is to continue the monthly tax-free SSI disability benefits and secure access to Medicaid. A Special Needs Trust (SNT) allows a personal injury victim to receive a personal injury settlement/award without disqualification from SSI or Medicaid. The reason for this is because federal law allows money to be placed into an SNT and it is not a countable resource for purposes of qualifying for needs based public assistance programs (See 42 U.S.C. 1396p). In order to create a Special Needs Trust the personal injury victim must meet the definition of disability contained in the Social Security Disability definition (See 42 U.S.C. 1382c). Is There More Than One Type Of SNT? There are several different types of SNT’s.
  1. Disabled person under age 65 (42 U.S.C. 1396p(d)(4)(A)): this trust is established with funds of the disabled person (typically a personal injury settlement/jury verdict) for the benefit of a disabled person who is under age 65 at the time of drafting the SNT. After the death of the beneficiary, then the law requires that any remaining funds are first used to repay any Medicaid lien due for benefits paid during the lifetime of the beneficiary and only if there are any funds remaining, then they can be distributed to the heirs of the beneficiary according to the terms of the Trust.
  2. Disabled person over age 65 (42 U.S.C 1396p(d)(4)(C)): this trust is typically called a Pooled Trust and is again established with funds of the disabled person; however, this person is over age 65 at the time of drafting the SNT and, therefore, once the beneficiary passes, then any assets remaining in the Pooled Trust must remain in the Pooled Trust for the benefit of other disabled beneficiaries or must be paid to Medicaid.
  3. Person who receives too much income to be qualified for Medicaid (42 U.S.C. 1396p(d)(4)(B): sometimes called a Miller Trust; and
  4. Third Party Special Needs Trust: this trust would be established by someone else (parent, grandparent, etc.) for the benefit of a disabled person. This trust would provide for comfort and happiness for the benefit of the disabled person during their lifetime, but once that disabled person passes away, the grantor of the trust in establishing the trust, would have made a decision as to where any funds remaining in the trust would go.
How Do I Know If I Need An SNT? If you do not have enough money to pay for all of your future medical care and support from your settlement and you are currently eligible for SSI/Medicaid, then you should consider establishing a SNT. Again, you must be disabled by the definition of Social Security Disability in order to qualify to use a SNT. How Can An SNT Be Funded With Personal Injury Proceeds? There are two ways the trust can be funded. First, all of the settlement proceeds could be placed in the SNT. The investment of the money by the trustee will cause the interest earned to be taxable. Second, part of the settlement proceeds can be used to seed the trust with the remainder being used to purchase a structured settlement annuity that will make payments into the trust. The interest earned on the structure is not taxed. However, once payments are made into the trust and invested by the trust, the interest earned by the trust is taxable. What Are The Advantages Of A SNT? There are several advantages to the Special Needs Trust:
  • The personal injury victim has access to Medicaid rates and services. Yet he or she can still purchase medical services and equipment at regular rates whenever necessary.
  • The trust beneficiary continues to receive SSI disability benefits adjusted upward for the cost of living each year. Over time, that also yields a significant amount of money.
  • A trust is, as the Florida Supreme Court stated in Kush v. Lloyd, an ideal vehicle to provide continuity of fiscal management over a long period of time, even without consideration of eligibility for SSI and Medicaid; there are no annual guardianship reports to file, and trust withdrawals can be made on a regular as well as an emergency basis without court order.
What Are The Disadvantages Of A SNT? The main disadvantage to establishing a Special Needs Trust is that the personal injury victim, or the family, cannot have unrestricted use of the money to spend in any way he, she or they see fit. However, with good planning and under the appropriate circumstances, the settlement proceeds can be used to substantially improve the life of the disabled person and his or her family, provide for future security, protect access to Medicaid, and manage the money in an efficient and secure manner. Another disadvantage is the trust must provide that upon the individual’s death the state receives all remaining amounts up to the amount of the public assistance paid on behalf of the individual. This payback provision must be included in an SNT. Only what is left after Medicaid is paid back can be paid to family members of the victim. How Does An SNT Operate? For purposes of maintaining SSI and Medicaid, the beneficiary must not have direct control of the funds. A trustee is selected to hold the assets and that trustee is usually a bank or trust company. The trustee must be directed to maximize the benefit of the trust where appropriate, paying for only those items for which the beneficiary is not otherwise eligible from government benefit programs, such as SSI, Medicaid, group homes, nursing homes, etc. The trust must be irrevocable. Pay For? The purpose of the trust is to retain Medicaid, and use trust funds to meet the supplemental, or “special” needs of the beneficiary. These can be quite broad, however, and include special education, health, comfort, medical and dental expenses, trained medical assistance staff (24 hours or as needed), independent medical check-ups, equipment, supplies, programs of cognitive and visual training, respiratory care and rehabilitation (physical, occupational, speech, visual and cognitive), eye glasses, transportation (including vehicle purchase), maintenance, insurance, essential dietary needs, and private nurses or other qualified caretakers. Also included are non-medical items, such as electronic equipment like radios, record or CD players, televisions, VCRs, computer equipment, vacations, movies, trips, travel to visit relatives or friends, summer or day camps, college or technical school tuition, and other monetary requirements to enhance the client’s self-esteem, comfort or situation, and generally pay expenses that are not “food and shelter” which are part of the SSI disability benefit payment. However, even “shelter” expenses is broadly defined and would exclude payments by the trustee directly to the lawn maintenance service employed to cut the client’s grass. In some cases, monthly mortgage payments can be made; however, the payments may reduce the client’s SSI monthly check due to the application of the “presumed value reduction” rule. Medicaid will cover some of these items. For example, Medicaid will pay for a specifically fitted wheelchair, costing $6,000. However, they will only pay once every five years. The SNT can pay for modifications or a new chair if needed on a more frequent basis then Medicaid will pay for. As another example, when Medicaid does not pay for second opinions prior to surgery, the trust can. Sometimes the trust beneficiary may be covered under a parent’s or spouse’s employers’ group health plan. Yet many of those plans have restrictions on the number of respiratory therapy or psychological counseling visits. If the private insurance does not pay, the trustee will look to Medicaid. But if neither pays, the trust is available to pay those medical bills. What Happens If The Personal Injury Victim No Longer Qualifies For Medicaid? If a personal injury victim wins the lottery, marries into (relative) wealth, inherits other money, becomes self-employed, or loses SSI eligibility and Medicaid for any other reason, the trust will continue to be available to meet the victim’s needs, in the same manner as guardianship account funds would continue to be available, only easier — the limitations on expenditures in the SSI and Medicaid rules would not be a factor in decisions about disbursements. What Happens To The Money Remaining In The Trust After The Death Of The Beneficiary?
  1. If the beneficiary was under 65 when the Trust was drafted, then the law requires that any funds remaining in the SNT after the death of the beneficiary be paid first to the State of Florida, Agency for Health Care Administration, to repay any Medicaid lien. Remember, that although you are properly qualified for Medicaid during your lifetime, Medicaid has the right to demand reimbursement from your estate for any funds that they paid for your medical care during your lifetime. Therefore, only if there are any funds remaining in the Trust after Medicaid has been repaid, then those assets would be distributed to your heirs (whomever you decide them to be).
  2. If the beneficiary was over 65 when the Trust was drafted, then the law requires that any funds remaining in the SNT after the death of the beneficiary, be retained in the Pooled Trust for the benefit of other disabled beneficiaries or, if there are none, then the funds must be paid to Medicaid.
Is There A Guarantee That If I Create An SNT I Will Always Qualify For Medicaid/SSI? No. If you win the Florida Lottery next week, you will no longer be financially eligible for any needs-based (welfare) programs like SSI and Medicaid. The trust will still serve as an appropriate vehicle to manage your settlement proceeds without any restrictions on the use of the money. Also, there is no guarantee that Congress will not amend the Medicaid statute, or that the Social Security Administration staff reviewing the client’s trust and their new financial situation will not make a mistake and attempt to disqualify the client. However, Congress’ actions in 1992 and in August 1993 have shown movement towards expanding access to Medicaid benefits for disabled individuals. It appears that Congress is attempting to encourage other family members and the courts to financially plan for and use additional resources to meet disabled individuals’ medical needs. With regard to children and SSI eligibility, Congress amended the Social Security Act in 1992 to expand SSI benefits for children, and to provide that if children who were previously denied subsequently became eligible and received large retroactive awards, such retroactive awards may be held in Special Needs Trusts. Similarly, the Social Security Administration (SSA) has issued new amendments to its internal procedure manuals in March 1994 clarifying that individuals may be the recipients of trusts and still retain SSI (and Medicaid). New “deeming regulations” issued in January 1995 are also more expansive and extend SSI and Medicaid benefits to families previously disqualified. SSA has also distributed informational brochures to clients telling them that correctly drafted trusts will not eliminate eligibility for SSI benefits. However, there are literally tens of thousands of caseworkers across the country making individual claims decisions every day. No one can guarantee that they will not make a mistake and deny a claim for continued SSI and Medicaid benefits that should be approved. There is one thing that is absolutely guaranteed: if the settlement award is more than $2,000 and no Special Needs Trust is created, you will lose SSI and Medicaid when the Social Security Administration is advised of the settlement award. Furthermore, it is a crime to fail to report such a settlement to Social Security if it will affect future eligibility, and the Social Security Administration may seek to recover the resulting overpayments through collection by the U.S. Attorney’s office. None of the foregoing information should be constructed as legal advice. Please consult an elder law attorney regarding these issues.

Frequently Asked Questions

How is the Medicare Set Aside (hereinafter MSA) account administered?

The Centers for Medicare and Medicaid Services allows your MSA account to be administered in any of the following ways:
  • Self‐administered account
  • Custodial account
  • Medicare Set Aside Trust account
  • Medicare Set Aside/Pooled Special Needs Trust
 

What is a self‐administered MSA account?

Although it is perfectly legal to self‐administer your MSA account, it can be a daunting task, as well as a huge liability. If you elect to self‐administer your account, you must have both the financial and medical wherewithal to do so. From a financial standpoint, you must be proficient in bookkeeping and accounting. CMS requires you to do an annual filing every year. These annual filings are required by CMS to show how you have spent the money in the account and if the funds were used appropriately for Medicare expenses related to the accident. The slightest mishap in accounting or any misappropriation of the funds could result in losing your Medicare eligibility. If you are self‐administering your MSA account, you will also be responsible for filing a self‐attestation form when the money in your account has been dissolved.  

What can I use my Medicare Set Aside account to pay for?

The funds can be spent ONLY on Medicare allowable items related to treatment for your accident related injuries. In other words, the MSA funds can be spent only on medical items related to your accident that Medicare would have ordinarily paid for had there not been an accident. Instead of you billing Medicare for the medical treatment received, you are required to use the funds in the MSA account to pay for that treatment.  

What are the requirements for self‐administration of MSA account?

One of the requirements by CMS is that your MSA funds be allocated to a separate, interest‐bearing account that is insured by a Federal Deposit Insurance Corporation (FDIC) bank. You must keep these monies separate from your other bank accounts. This account may be a savings or checking account. If the set aside is professionally administered, the MSA administrator must prepare an annual accounting summary concerning the expenditures from the set aside and send it to the CMS Medicare contractor responsible for monitoring the individual’s case. The purpose of these filings is so that CMS can determine the funds have been exhausted properly. From a medical standpoint, there are complexities involved knowing medical billing rates, medical fees schedules and medical coding issues. You have to be responsible for knowing what is Medicare allowable related to your accident and what is not Medicare allowable. The best gauge for determining what is covered by Medicare is the actual Medicare set aside analysis that was completed by the independent company or MSA specialist.  

What are my options for a professionally administered Medicare set aside account?

If you are considering professional administration, you have several options. Most professional administrators of set asides provide the service through a custodial arrangement or trust agreement. A custodial arrangement is an agreement under which a nominee or registered owner holds an asset or property as a custodian on behalf of an actual owner (beneficial owner). These custodial arrangements are contractual agreements and do not create the same level of fiduciary obligation on the part of the administrator as is possible with a trust. Typically, custodians do not need any type of licensure whereas trust companies or banks do, which is another layer of protection for the injury victim’s funds.  

What is a MSA Trust Agreement (MSAT)?

An MSAT is a formal trust agreement administered by a corporate trustee typically paired with a professional Medicare Set Aside administrator. With an MSAT, you get a trustee that has a fiduciary duty paired with a set aside administrator who can handle the intricacies of managing set aside funds and reporting to CMS. If the trustee or administrator can no longer perform their duties, a new trustee or administrator may be appointed but the fiduciary obligations and creditor protections of the trust remain. Trusts are covered by state trust and fiduciary laws.  

Does Medicare own the money in the MSA account?

No, the monies belong to the injury victim not Medicare.This means at death the unused funds go to the injury victim’s beneficiaries (assuming the custodial agreement or trust provide for this). When the injury victim dies, the set aside should be left “open” for 15‐27 months since Medicare providers have a long period to bill for services rendered and there may be bills the set aside must pay.  

What about the interest earned in the MSA account?

The interest earned on the MSA account cannot be used for any purpose outside of MSA criteria. The interest earned on the monies in the set aside are taxable but the set aside funds can be used to pay taxes. The interest is retained in the set aside and can’t be withdrawn.  

What if the settlement involves an incompetent injury victim?

If a settlement involves someone incompetent to handle their own affairs then obviously a professional administrator must be used. Summary of MSA administration There are no “Medicare Set Aside police” monitoring set asides but if the MSA is improperly administered then that can lead to a loss of coverage for injury related Medicare covered services. In the event of improper expenditures, the injury victim would have to replenish the set aside and exhaust those funds properly before getting Medicare coverage again for injury related care. Accordingly, it is vitally important to make sure the set aside is properly administered. Given the government’s increased efforts to enforce the Medicare Secondary Payer Act a la mandatory insurer reporting, CMS has more information than ever to make sure of proper enforcement.  

Additional MSA Administration Resources:

» A Primer on Medicare Set Aside Self-Administration » Preservation of Medicare Benefits & Medicare Set Asides  
What Is a Medicare Set Aside? A Medicare set aside (herein after MSA) is a tool that allows a workers’ compensation claimant to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered expenses. However, the funds in the set aside can only be used for Medicare covered expenses for your work related injury. Once the set aside account is exhausted, you get full Medicare coverage without Medicare ever looking to your remaining settlement dollars to provide for any Medicare covered health care. Medicare approves the amount to be set aside in writing and agrees to be responsible for all future z expenses once the set aside funds are depleted. Who Needs an MSA and Why Do You Need One? If you are currently a Medicare beneficiary and you settle your workers’ compensation case you will need an MSA. If you have a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date and the total settlement amount exceeds the amount set by the Centers for Medicare and Medicaid Services (hereinafter CMS) then you will need an MSA. Assuming you fall into one of these two categories, you need to establish an MSA because if you do not you could lose Medicare eligibility for your work related injuries. If I Am Not Yet Eligible For Medicare, Can I Use the MSA Funds? For claimants who are not yet Medicare beneficiaries and for whom CMS has reviewed a workers’ compensation Medicare set-aside arrangement, the MSA may be used prior to becoming a beneficiary because the amount of the set aside was based on the date of the expected settlement. Use of the MSA is limited to services that are related to the workers’ compensation claim or settlement and that would be covered by Medicare if the claimant were a Medicare beneficiary. Who Determines the Amount Set Aside? A professional who specializes in “allocations” examines the settlement and makes recommendations based on the amount of care that is covered by Medicare. The company hired to perform the allocation determines how much of your future medical care is covered by Medicare and then multiplies that by your remaining life expectancy to determine the suggested amount of the set aside. Medicare does not necessarily simply accept the allocation recommendation. Medicare could require more to be set aside than the amount suggested in the MSA allocation. How Is the Set Aside Funded? The set aside can be funded with a single lump sum out of the settlement proceeds or with future periodic payments using a structured settlement. A single lump sum funding makes the set aside easier to administer but means more must be set aside than using a periodic payment arrangement. Funding with future periodic payments via a structured settlement makes the administration of the set aside harder but it is a much less expensive way of funding the set aside. When a set aside is funded with a lump sum, as soon as the account is exhausted Medicare begins to pay for work injury related health care. However, when a set aside is funded with periodic payments via a structured settlement annuity it functions much like a yearly insurance deductible. Each year, the structure payment would fl ow into the set aside, and when the funds are exhausted in that year, Medicare would begin paying for services related to the work injury. If the funds are not all spent in the year the periodic payment is made, they carry over to the next year. Thus, Medicare only pays once all funds for any given year have been exhausted. Why Is a Rated Age With a Structured Settlement So Important to My MSA? Age ratings can save on the cost of the structured settlement annuity and reduce the amount of the set aside. A rated age is a life expectancy adjusted age used to calculate the cost of a structured settlement. If you receive a rated age it means that the life insurance company has decided that your life expectancy is less than normal due to your medical conditions and accordingly allows the annuity to be priced as if you were older. Shortened life expectancy translates into a lower structured settlement cost when compared to a structured settlement priced with normal life expectancy. Additionally, CMS considers a reduction in life expectancy when determining how much must be set aside. As evidence of reduction of life expectancy, CMS will look at the highest age rating issued by the life insurance companies issuing age ratings. Therefore, not only does it cost less to fund a set aside with a structure but it also reduces how much must be set aside in the first place. Why Should I Fund My MSA With a Structured Settlement Annuity? There is a cost savings by purchasing a stream of benefits today that will provide benefits tomorrow especially if there is a rated age. What this means is that less money must be set aside when a structure is used to fund the set aside. In addition, interest earned on the funds in the structured settlement is not taxable. The structure becomes a tax free, cost free investment to fund the set aside. CMS routinely approves set asides being funded with structured settlement annuities and mentions their use in their memo. Will the MSA Also Protect My Medicaid Eligibility? No. An MSA only protects future Medicare eligibility. If you receive Medicaid in addition to Medicare, a special needs trust (hereinafter SNT) might be necessary to preserve Medicaid eligibility. If it is necessary, a hybrid MSA/SNT can be created to deal with this issue. If I Am No Longer Entitled to Medicare Can I Withdraw Funds From the MSA? No. You are not entitled to release of the MSA funds if you lose your Medicare entitlement. However, the funds in the MSA may be expended for medical expenses specified in the MSA agreement until Medicare entitlement is re-established or the MSA is exhausted. What Happens to the Funds in the MSA Should I Pass Away? The MSA funds, either in lump sum or structured settlement (if guaranteed), would go to your beneficiaries under the MSA agreement. Medicare only requires the funds to be used for your future Medicare covered work injury related expenses. Therefore, once you pass away those funds can flow to your family or named beneficiary. If a structured settlement is set up and you want money to go to your family or named beneficiary, you should request that the annuity be “guaranteed” instead of life only.

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Rick Kolodinsky
Rick Kolodinsky, P.A.

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