Jimmy’s life changed in an instant during a family trip to an amusement park. The formerly active and athletic 14-year-old suffered catastrophic injuries when a defective roller coaster seat broke during his ride. Jimmy’s multiple bone fractures, internal injuries, and severe head trauma resulted in his becoming a paraplegic.
Shortly after Jimmy’s family filed suit, the amusement park and the manufacturer of the defective ride settled the claim. After paying attorney fees, expenses, and medical liens, Jimmy would net $1,600,000.
Jimmy’s parents were eager to provide him with all of the care he needed. His mother wanted to quit her job to care for him full time. However, Jimmy’s injuries were too severe to hope for a quick recovery, no matter how much care he received at home. His head trauma had caused brain damage, and the prospect of future surgeries was certain.
Before his injury, Jimmy would have attended his local high school, participated in athletics, and gone on to college. Due to the severity of his injuries, this was no longer an immediate possibility. For now, Jimmy would attend specialized classes, and his hopes for a college education were diminished. It was clear that his parents needed a plan to secure Jimmy’s long-term medical and custodial care costs.
The family’s attorney recognized the complexity of Jimmy’s case and called Robin Young. Jimmy’s case was going to take much more than a one-size-fits-all settlement. Young immediately recognized the challenges of the many variables: Jimmy’s immediate and long-term health care coverage and costs, preservation of future SSI and Medicaid, custodial care, and education expenses.
A family with a special needs child like Jimmy must exercise care in making their estate plans, including a plan for the child while he is a minor and for his future as an adult. This is particularly true when the child is receiving “means tested” government public assistance such as Supplemental Security Income (SSI) and Medicaid – now or in the future. While planning varies depending on the child’s competency, age, and other family considerations, the goal is always the same: To enhance and enrich the life of the special needs child while preserving his qualifications for government assisted public benefit programs.
Working closely with Young, Jimmy’s family planned a course of action that secured his immediate and long-term future. Their goals were met through the use of a properly prepared structured settlement combined with a special needs trust. Jimmy’s settlement money would be available to supplement his standard of living for his lifetime.
Life Changing Considerations
- Jimmy incurred bone fractures and internal injuries resulting in his becoming a paraplegic with severe head trauma. His head trauma causes chronic headaches, blurred vision, speech impediments, and memory loss. Jimmy will require ongoing medical care and future surgeries. His emotional state is fragile as he battles nightmares, depression, and life-altering circumstances.
- Jimmy is currently covered under his father’s group health insurance plan. But what happens when his father retires or passes away? What if their health insurance is capped and they no longer have coverage? Jimmy is an only child – what happens when his parents die and they leave their estate?
- Jimmy’s parents do not have the extra money to upgrade and modify their home to accommodate Jimmy’s disabilities.
Jimmy and his Family’s Desires and Goals
- Modify the family home for Jimmy’s disabilities: Add a room to the family home designed to accommodate Jimmy’s special needs and equipment. Add a wheelchair ramp, widen the doorways, modify the bath and toilet, buy a larger bed with pulleys, and add a therapy room so that Jimmy can continue his rehabilitation in the comfort and privacy of his home.
- Pay off all debts.
- Peace of mind that Jimmy will be taken care of should the parents become disabled, elderly, or pass away.
Plan of Care
- Health Insurance: Research confirmed that Jimmy’s insurance is secure through his father’s employer until his father’s retirement, death, or until the family reaches their insurance cap. Advance planning through a Special Needs Trust will preserve Jimmy’s future Medicaid eligibility (Long Term Medicaid and Long Term Care), if needed and applicable.
- Parents’ Estate: Young introduced Jimmy’s parents to an Estate Attorney to provide a secure estate plan in the event Jimmy’s parents became disabled or passed away.
- Special Needs Trust: By using a properly drafted and administered special needs trust, advance planning for future government benefits will be provided in the event Jimmy’s parents become disabled or pass away; if Jimmy decides to move out on his own as an adult, or if he moves into an assisted living home or hospital.
A special needs trust qualifies because the assets held in the trust are not considered an asset available directly to the child (or once he becomes an adult). In addition, if a special needs trust is funded with a structured settlement annuity, the annuity payments cannot be considered assets of income available directly to the child (or adult). The corpus of the trust will be managed and administered by a trustee working with Jimmy and his family to ensure proper financial management, and advise Jimmy and his family on proper administration to ensure the child remains eligible for future government benefits and programs.
- Cash Availability: $500,000.00 upfront cash would be deposited into the special needs trust. Debt was determined so that the trustee could pay off all debt. The balance of upfront cash would provide for the home upgrades and modifications, as well as provide a cash reserve for unforeseen needs.
- Structured Settlement: The remainder of the settlement award will be carefully designed in a structured settlement that meets federal and state rules for an annuity plan as it relates to preserving immediate or future SSI and Medicaid eligibility.
Young submitted Jimmy’s Life Care Plan and medicals to obtain a substandard age rating. Utilizing the substandard age rating, Young was able to secure better rates for the monthly benefit.
Structured Settlement Annuity (the design of the payment stream)
$3,312.60 payable monthly for life, guaranteed for twenty (20) years, increasing at a rate of 3% annually.
To meet the federal and state rules, Jimmy’s payments will be deposited directly into his special needs trust each month.
$1,068,130.00 Guaranteed Benefit
$4,483,811.00 Expected Benefit
All benefits are tax-free.
Guaranteed and Expected does not include the upfront cash portion as illustrated to be $500,000.00 directly to the special needs trust.
Cost, rates, and benefits subject to change and review; the above has been provided as a sample illustration based on this Case Study.
While Jimmy’s life will never be the same after that fateful vacation, Jimmy and his family gained peace of mind by working closely with Young and her team of expert referrals. Jimmy’s parents developed a much greater understanding of the options and resources available to them in making an appropriate settlement plan for their special needs child. After making their wishes known and putting the proper documents in place, they felt they had taken the crucial steps to ensure that their son will receive proper care, and that his settlement is safeguarded, maximized, and will be last Jimmy’s lifetime. This plan helped supplement and enhance the quality of both Jimmy and his family’s life.