Can you qualify for public benefits after winning a lawsuit?

On Behalf of | Sep 30, 2022 | Estate Planning |

If you have suffered a catastrophic injury because of someone else’s negligence, you may have little choice but to file a personal injury lawsuit. After all, you are likely to have piles of medical bills you cannot begin to pay. You also may never be able to work again because of your injury.

If the resolution of your personal injury case leaves you with millions of dollars, you may never have to worry again. Many lawsuits do not make plaintiffs millionaires, though. Unfortunately, according to AARP, though, your settlement or jury verdict is likely to make you ineligible for Medicaid and other means-tested government benefits.

What is a payback trust?

There is a common workaround you may want to explore. With a payback trust, you put proceeds from your lawsuit into a trust rather than placing them into your bank account. When you structure the trust correctly, funds in it do not count as income or assets when you try to qualify for Medicaid benefits.

How does a payback trust work?

When you die, the remaining funds in the payback trust must go to repay the Medicaid benefits you have received during your lifetime. If you have no heirs, this technicality may not concern you much. Beyond that, you are likely to appreciate receiving government help for basic medical care, especially if your lawsuit proceeds are meager.

It is important only to use funds in your payback trust on expenses that government programs typically do not cover, such as travel, home improvements, education and uncovered medical bills. That is, if you use the trust to pay for covered medical care, you may lose your public benefits.

Ultimately, though, if you want to get the most benefit from your lawsuit and from means-tested government benefits, exploring a payback trust is probably worthwhile.