PI Litigation

1. PI Litigation By Diedre Wachbrit and Evan Krame

2. The Trial Attorney’s Concerns • Bring the case to resolution • Offer the client appropriate vehicles for the recovery • Protect the client from the risk that the money will not last

3. Who is the client • Ask the litigator: who is your client? • If it is a client with limited capacity, the attorney may resist the appointment of a guardian ad litem

4. Gather Information • A copy of the complaint • The terms of the settlement • Any motions to approve the settlement

5. Necessary Analysis • A Life Care Plan • An evaluation of other resources available • Room for the unexpected

6. Analysis of Intangibles • Who will be the healthcare advocate • Who will serve as ombudsman for the plaintiff in a nursing or group home

7. Order of Payments • Out of a settlement, first costs of litigation and existing liens are paid • Attorneys fees and other litigation costs are paid • Medicaid liens are paid • The remainder goes to the beneficiary or to a special needs trust

8. Options for the Balance • A Special Needs Trust • Directly to the plaintiff • Directly to the plaintiff’s legal representative • To an annuity provider in exchange for a series of payments (a “structured settlement”)

9. Special Needs Trusts • A special needs trust funded by litigation proceeds is a self-settled trusts • OBRA ’93 provides two types of self-settled trusts • The “payback trust” under 42 USC 1396p (d)(4)(A) (aka “the D4A trust”) • The “pooled trust” under 42 USC 1396p (d)(4)(C)

10. Medicaid Retention • Many P.I. attorneys do not realize the extent of what Medicaid provides • In borderline cases, the P.I. attorney’s recommendation will carry great weight • The SNT attorney may need to educate a very busy P.I. attorney on these two issues

11. D4A Selection of a Fiduciary • The court has discretion to appoint a trustee for all SNTs established by court order • Family members may be appointed but do not have any legal right to be appointed • Bond may be required • Bond may be refused because of the “swimming pool problem”

12. D4A Attorneys as Fiduciaries • Often the SNT attorney is chosen by the court to serve as Trustee • Compensation may be limited and dramatically below an attorney’s hourly rate • Compensation is overseen by the court

13. D4A Beneficiary Demand Challenges • Requests for disbursements are frequent • Reasonableness is sometimes borderline or lacking • Compliance with benefits law must be examined

14. The D4A trustee’s multiple roles • Social Worker • Benefits Planner • Money Manager, Investor and Administrator • Bookkeeper • Caring Advocate • Tax advisor

15. D4A Bank Trustees • Many banks do not handle special needs trusts • Minimum balances are $500k and above • SNTs have declining balances • SNTs have high overhead and administration costs for the bank

16. The D4A Dream Trustee • Experience and expertise • Availability • Minimum required deposit fits • Trust fees and expenses are reasonable

17. Pooled Trusts – the D4C • Accept smaller settlements • Trustee is already selected • Money is professionally invested • No swimming pool problem • Available to those over 65 (d4a trusts are for those under 65 only) • Lower cost to setup

18. Comparing Trustees • Bonding • Experience • Personal attention • Durability • Removal • Fees

19. The Remainder Beneficiary • Court may prefer intestacy • Custodial parent often feels entitled • Beneficiary may have capacity to choose

20. Authority to fund a trust • Only a court, parent, grandparent or guardian/conservator can fund a D4A trust • A pooled trust can be funded by a competent client directly • Incompetent clients and minors must rely upon a court order to fund their trusts

21. Structured Settlements • Also known as a “Settlement Annuity” • For a sum, the annuity company promises to pay a periodic amount for an agreed upon term • Must be purchased as part of the settlement • May be the only tool the plaintiffs’ attorneys know

22. Structured Settlements: Reasons I • The plaintiff’s attorneys know that the client, who may never have handled so large a sum of money, will not run out due to lack of experience or self-control • Family member trustees will not run out of money due to lack of experience or self-control • Attorneys may have liability if they do not introduce structured settlements to their clients (see materials for Grillo case)

23. Structured Settlements: Reasons II • The stream of income is tax-free to the beneficiary • There are no ongoing investment management fees • The funds are insulated from the ups and downs of the market

24. Opposition to Structured Settlements • The Grillo case was settled and there is no case that attorneys have liability for failure to recommend a structure • The income stream is inflexible and cannot respond to emergency or major cash needs • Structured settlements have high initial fees • The returns on structured settlements may be lower than what a diversified portfolio would produce • Big ticket items, such as a home, cannot be easily acquired

25. Structured Settlements & Annuities • Annuity payments must be made directly to the SNT • The SNT should also hold a lump sum that can be used to fund major unexpected items and big ticket purchases • A life care plan can assist in determining the proper balance between structure and lump sum • Income can be received income tax free (but first consider how large the beneficiary’s tax burden is likely to be

26. The DRA and Structured Settlements • The DRA mandates that the state is named as a remainder beneficiary on annuities for Medicaid recipients • Does this apply to structured settlements?

27. Poor Ralph • Plaintiff’s attorneys need to understand SNT options • Attorney Ralph W. Brown of Maine was suspended from law practice for six months • Failure to advise re Medicaid planning was a contributing factor

28. How to approach P.I. attorneys • Write for P.I. attorney publications • Get to know the structured settlement leaders in your area • Speak at P.I. attorney events

29. Working with the P.I. Attorney I • Acknowledge the trial attorney’s accomplishment • Recognize the trial attorney’s emotional involvement in helping the client • Be willing to meet the plaintiff in the trial attorney’s office

30. Working with the P.I. Attorney II • Be open to alternatives to SNTs: • what has the trial attorney already suggested • Prepare the trust immediately; do not hold up the settlement • Offer to appear at any hearings where the SNT may come up

31. Structured Settlement Advisors • Need SNT attorneys to create the most effective strategy for clients • Can be excellent sources of new clients

32. Working with Structured Settlement Advisors • Use a team approach • Understand the tax benefits to the beneficiary • Educate the representative about SNT benefits

33. Determining the right amount to structure • Major purchases require planning • Who is the trustee? • Swimming pool problem

34. Resolving the structure versus SNT controversy • Structures can ensure the funding will last for a lifetime even with family-member trustees • Structures can be placed into SNTs • Structures can be priced to cover only the beneficiary's predictable month to month needs

35. Spend-down vs. SNT • Where the amount can be spent down in less than one month, benefits may be retained • Where non-governmental resources are sufficient to meet the beneficiary’s needs • Where private care is preferred to Medicaid Carefully separate the family’s interests from the beneficiary’s interests

36. Funding an SNT through guardianship • 42 USC 1396 (D)(4)(A) permits a guardian to fund an SNT • Must also comply with local guardianship law

37. Venues for establishment of SNT • Probate court • The court approving the settlement CAUTION: Some states require additional approval such as by the attorney general

38. The Petition to establish the SNT • Local law may provide explicit language you must include in your petition • Where local law is silent, consider using the petition for guardianship as a model