by John Darer CLU ChFC CSSC RSP
The State of New Jersey has taken the position that money in a qualified settlement fund is an available source of income and resources for New Jersey Medicaid beneficiaries. This seems to throw a a monkey wrench into the single claimant qualified settlement fund argument [Source: settlement tax expert Higgins Settlement law blog (November 2, 2011)]
In the words of the State’s attorney: “It is irrelevant that he did not receive distributions and was unable to direct distributions to himself.” The State relies on 42 U.S.C. section 1496p(d)(3)(B) discussing irrevocable trusts. According to Higgins Settlement Law, the beneficiary’s counsel intends to file a federal lawsuit to clarify the issue so stay tuned.
In the meantime if the State of New Jersey's position reaches the State's apparent intended legal conclusion. it creates an interesting question. If the funds in a Qualified Settlement Fund are determined to be "an available source of income and resources" for New Jersey Medicaid beneficiaries, what about the rest of the money in the QSF, such as the money in the QSF that would be used for structured settlements and structured attorney fees? Could it be determined that it is "an available source of income and resources" for one and not the other?
Rev Proc.93-34 permits qualified assignments out of a qualified settlement fund. If New Jersey's position sticks isn't that going to create a conflict?
Times have changed. With few structured annuity issuers accepting qualified assignments from single claimant qualified settlement funds, neither plaintiffs nor plaintiff attorneys benefit from the claim of "full market access" that was previously touted by some settlement planners as a reason to do a QSF.
When it comes to your attorney fees and your client's financial future, why ride "the bull" when there's a chance you will end up in "shit"?