A trigger trust can be beneficial for a client who does not currently need or qualify for these needs-based government benefits (Medicaid, SSI, Section 8 Housing) but who may need such government assistance in the future depending on what happens in the future.
Recipients of personal injury settlements frequently deal with many types of uncertainty. They are often unable to accurately predict their future health, level of independence, lifestyle, employment opportunities and capabilities, and their future eligibility for “needs-based” government benefits (Medicaid, SSI, Section 8 Housing). While much of this uncertainty is unavoidable, settlement trusts can often be tailored to meet the particular needs each client has today while also anticipating needs that may arise in the future.
A trigger trust offers an elegant part of a settlement plan to allow the allocation of the settlement funds while preserving the possibility of securing needs-based government benefits if needed in the future. A trigger trust can be beneficial for a client who does not currently need or qualify for these needs-based government benefits (Medicaid, SSI, Section 8 Housing) but who may need such government assistance in the future depending on what happens in the future.
Injury victims are often optimistic at the time of settlement and believe that they will be able to return to work, earn an income, and return to pre-injury life. Thankfully many do. However, months after their injury settlement, many injury victims find that they can no longer work or can’t work enough hours to qualify for medical coverage through their employer. These individuals may find themselves in a situation where they have high medical expenses, little income, and no insurance, yet because of their injury settlement they don’t qualify for Medicaid.
In these situations a trigger trust can be particularly useful. The settlement funds directed to the trust are managed and protected from dissipation by the recipient. Typically, the trustee of a trigger trust will have broad discretion to use funds from the trust for anything the beneficiary needs until and unless the trust is “triggered” by an election to change the trust into a special needs trust (“SNT”). Once triggered the beneficiary may from that time forward be eligible for needs-based government benefit. However once triggered, the trustee’s discretion is immediately restricted to comply with the severely restrictive requirements of an SNT.
In this way, the trigger trust eliminates much of the financial uncertainty that comes with a personal injury settlement without the immediate impact of the restrictions required of an SNT. Trigger trusts can also receive guaranteed structured settlement annuity payments, thereby adding an additional layer of financial security.
It is often advantageous to implement this strategy at the time of settlement so that the trust can be created by order of the court. As always, we recommend developing a thoughtful, comprehensive settlement plan and doing a thorough government benefits analysis for each client prior to distributing settlement funds. Your clients will thank you.