Reversionary Trusts (for Liability Cases)

In catastrophic injury cases requiring ongoing future medical management, often a component of the structured settlement will include a medical trust with a "reversionary" feature. Essentially, a fund is set up to cover unanticipated (and certain anticipated) medical expenses over the plaintiff's lifetime. This fund is generally in the form of an irrevocable trust managed by a bank with a third-party claims administrator retained for medical bill processing according to the terms of the trust agreement. Funded with an initial cash deposit, an annuity stream of income is directed to the trust to offset ongoing expenditures and inflationary pressures over time. In all cases, a Life Care Plan together with a Capital Needs Analysis are closely examined to assist in determining the appropriate amounts to deposit into the trust.

The results of negotiations will dictate the terms of the trust agreement and benefits payable, including the reversion (rights to remainder interest) of the trust and annuity when the trust beneficiary dies.

Medicare Set-Aside Trusts (for Workers Comp Cases)

When settling the medical expense portion of a workers compensation case, consideration must be made to Medicare in certain situations pursuant to the "Secondary Payor" rules.

The Medicare statute applicable - 42 U.S.C. Sec 1395Y of the Medicare Act states the following:

  • The Centers for Medicare and Medicaid Services' (CMS) interest be protected
  • The Centers for Medicare and Medicaid Services have monetary rights against plaintiffs, plaintiff attorneys and plaintiff advisors when the services' interest is not protected
  • The Centers for Medicare and Medicaid Services have double recovery rights against insurance carriers, their legal counsel and their advisors when the interest of the services' is not protected

Compliance to the terms of the Medicare Act can be accomplished by depositing cash or periodic payments in a Medical Set-Aside Trust ("MSAT") equal to the present value (today's dollars) required to adequately fund all future medical expenses. CMS issued guidelines in a series of memos with respect to the criteria by which a set aside arrangement reasonably considers Medicare's interests. Among the criteria used in the determination, as outlined in the CMS Checklist, are as follows:

  • Date of Medicare Entitlement
  • Basis for Medicare Entitlement
  • Type and severity of injury or illness
  • Beneficiary's age, rated age and life expectancy
  • WC classification of beneficiary as permanently or partially disabled
  • Prior medical expenses
  • Amount of settlement and allocations to indemnity and future medical costs
  • Whether commutation is for claimant's lifetime or certain period
  • The beneficiary's living arrangements
  • Whether expected future medical expenses are reasonable and necessary

We associate with attorneys who provide the specialized expert services required in these transactions. Please contact us to discuss further.

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