Use of Special Needs Trusts
in New Jersey for
Personal Injury Settlements
How Do Special Needs Trusts
Protect Personal Injury Settlements
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Special Needs Trust Attorney
Personal Injury Settlements, Public Benefits and Disabled Individuals
Personal injury attorneys should avoid receiving payment from a defendant or the defendant’s insurance company into his or her attorney’s trust account for any funds that are intended to be placed into a special needs trust for the benefit of the disabled plaintiff. Payment of funds by the defendant to the plaintiff’s personal injury attorney constitutes constructive receipt by the person with a disability. It can be problematic.
Therefore, checks from the defendant should be made payable directly to the trustee of the special needs trust. Payments from a structured settlement should also be made payable directly to the trustee of the special needs trust. Constructive receipt by the beneficiary or his/her agent, i.e., the personal injury attorney, can cause a loss of public benefits because the SSI income and resource rules have been violated, if the funds are held by the personal injury attorney for a long period of time. If the funds are disbursed by the personal injury attorney in the month received, there is an overpayment of one month and SSI would have to be repaid.
In situations where there is a lump sum settlement and the defendant insists on paying the plaintiff’s attorney quickly, the court may enter an order that the monies be held in the attorney’s trust account subject to conditions, such as satisfaction of Medicare and Medicaid liens and the creation of a valid Special Needs Trust. This should avoid the constructive receipt argument by SSA. The trial attorney then makes the plaintiff’s check payable to the trustee of the special needs trust at such time as all of the conditions imposed by the court order are satisfied.
Involved in a lawsuit where the plaintiff is a disabled person receiving or possibly receiving public benefits in the future? Are you a plaintiff’s personal injury attorney? If so and you have questions about whether a Special Needs Trust is the right trust for you or your client, then call my office today.
Ask for me to personally discuss the details of a New Jersey Special Needs Trust. Call me toll-free at (855) 376-5291 or e-mail me at firstname.lastname@example.org.