Man who uses wheelchair does taxes on computer at desk in home office.Approximately 6 percent of adult Americans experience an activity-limiting injury every three months, according to the Centers for Disease Control and Prevention (CDC). Injuries can happen because of carelessness, such as distracted driving or a slippery floor at a restaurant or store. In fact, accidental injuries are also the fourth-leading cause of death.

Many people become injured in their workplace, resulting in a disability. According to the National Safety Council, workplace injuries occur as often as every seven seconds. The Social Security Administration (SSA) reports that 45 percent of men and 26 percent of women receiving disability benefits became impaired because of workplace accidents, injuries, or illnesses. 

In addition to causing death and disability, injuries claim a significant economic toll. The CDC estimates that in 2019, the economic cost of injuries was $4.21 trillion. This comprised $327 billion in medical care and $69 billion in loss of work.

Personal Injury Lawsuits 

If someone’s negligent actions cause an injury, the injured person can make a personal injury claim. This is where the help of personal injury lawyers comes in. The purpose of these types of claims is to recover compensation for the injury. 

Most claims primarily involve compensation for the financial and emotional cost of the injury. However, in cases of severe negligence, injured people can also receive additional money intended to punish the party responsible. 

Personal Injury Settlements 

When injured people bring claims against those at fault, they often reach a settlement agreement and receive compensation. For example, in the case of car accidents caused by negligence, automobile insurance companies would typically pay the settlement payments. (These payments might go to the injured individual as a lump sum or in installments.) 

The Law Dictionary reports that approximately 95 percent of personal injury cases settle before trial. For those cases that result in a trial, more than 90 percent end with an injured person or surviving family winning the case and receiving a money judgment. 

Are Lawsuit Settlements Taxable?

Whether a personal injury settlement is entirely or partially subject to federal income tax depends on the type of compensation the injured party receives. Personal injury damages fall into different categories, such as compensatory damages. These types of damages may compensate for things like lost wages or the cost of litigation. Other categories include punitive damages and damages for emotional distress. Some damages are not subject to federal income tax. 

The purpose of compensatory damages is to make the injured person “whole.” This type of compensation provides for money lost. 

For example, someone injured by a distracted driver could receive compensatory damages that make up for the financial losses from the accident. Compensatory damages could cover the cost of medical bills, follow-up appointments, and physical therapy. It also can address income diminished by loss of wages as well as the impact of pain and suffering. 

Because compensatory damages make up for financial losses directly resulting from the incident, they are generally not subject to income tax. To be tax-exempt, however, the compensation must address a physical injury. 

The Internal Revenue Service (IRS) typically considers compensation for emotional distress, mental harm, and mental illness as taxable income received. This is because the financial toll of mental anguish can be more challenging to measure. For example, someone who developed post-traumatic stress disorder (PTSD) following an accident might have to pay taxes on compensation for their PTSD. 

Although not common, victims of gross negligence may receive punitive damages in addition to compensatory damages. 

Punitive damages do not seek to make the person whole; instead, they punish the wrongdoer. Punitive damages do not provide compensation for direct, measurable loss. Therefore, they do count as income and are subject to federal income tax. 

State income tax rules vary. Some states, such as Florida, do not have an income tax. When states impose an income tax, taxation of settlements often reflects the federal rules. 

How to Avoid Paying Taxes on Settlement Money 

Advocating for their client, an attorney may negotiate a settlement that avoids federal income tax. Compensatory damages for physical injuries are generally not taxable. So, the attorney may emphasize the need for this type of compensation during negotiations. Some agreements explicitly state that the damages are not taxable. 

Even before you settle a personal injury lawsuit, consider consulting with your special needs planning attorney. Or you may want to direct your personal injury attorney to connect with them. Your special needs planning attorney can offer guidance on settlement planning.

If you have suffered an injury that has resulted in disability, you may qualify for public assistance. Your special needs planner can help identify the benefits programs for which you are eligible. They will have expertise on how a settlement might affect certain government benefits, such as Social Security Disability Insurance.

They also can assist you in establishing a Medicare Set-Aside trust when necessary. (These types of arrangements hold settlement money for future medical bills.)

According to a report published this month on Medicaid disenrollment by the Center for Children and Families, nearly 600,000 Florid children have been disenrolled from Medicaid since the pandemic protections theat provided for continuous coverage of Medicaid throughout the COVID-19 pandemic were eliminated by the Consolidated Appropriations Act (CAA) on April 1, 2023. Thereafter, some states started hastily removing many Medicaid-eligible children from its rosters.

Nationwide, by December 2023, nearly 4.16 million children had been disenrolled from Medicaid, with Florida, Texas, Georgia and California seeing the largest declines. Many of these children were provided coverage through the Medicaid/CHIP program, but others categories of affected individuals include those who received Medicaid under Disabled Adult Child benefits. The Disabled Adult Child program is a SSA-eligible determination that allows Medicaid coverage to continue, despite being ineligible because the child now receives a higher Social Security check due to the death or retirement of a parent.

It appears that many who received such notices have moved to the Florida KidCare program. As of April 2024, nearly 182,000 children have enrolled in Flordia KidCare, which represents a 66% increase year-over-year from 2023. But this still leaves a significant number of children possibly uninsured.

Florida is currently facing a class-action lawsuit filed by the Florida Health Justice Project. If you believe that you have received a termination of CHIP/Medicaid that might be incorrect, the Florida Health Justice Project has created a toolkit that guides parents on what they need to do. Included in the toolkit is an email template where you can request an appeal.

However, if you lost coverage of your Medicaid as a result of being a Disabled Adult Child and your Social Security payment increasing above the SSI amount, and you feel you were inappropriately included in the recent unwinding of Medicaid rosters in Florida, please reach out to our firm, as we are actively working on finding a solution to these issues.

Young woman with Down syndrome smiles with smartphone in hand while sitting on sofa.Half of Americans report that access to affordable housing is a problem in their community, according to the Pew Research Center. For families affected by disability, housing costs can pose a particularly significant concern. According to the Center on Budget and Policy Priorities (CBPP), more than 4 million people with disabilities are part of families that put more than half of their household incomes toward rent and utilities. 

In the United States, 5 million people rely on Section 8 housing vouchers to help pay rent. This includes families affected by disability, the CBPP reports. Meanwhile, the Urban Instituteestimates that 18 million people with disabilities may qualify for assistance that they do not receive. 

Many low-income people with disabilities use special needs trusts (SNTs) to maintain eligibility for public assistance programs such as Medicaid and Supplemental Security Income (SSI). While you can qualify for the Section 8 voucher program with an SNT, it can affect how much housing assistance you receive. 

What Is Section 8 Housing?

The Housing Choice Voucher Program, or Section 8 Housing, is the nation’s most significant source of rental assistance. The program aims to provide affordable, safe, sanitary housing to low-income families, seniors, and people with disabilities. 

Section 8 of the United States Housing Act of 1937 established the program. The Housing Choice Voucher Program is the formal name. However, many people refer to it as Section 8 because of the legislation that created it. 

A Section 8 housing voucher’s amount varies. It can depend on household income and size, local housing costs, and the Fair Market Rent (FMR). (The Department of Housing and Urban Development (HUD) calculates new FMR rates each year; they differ by region.) Typically, when families pay 30 percent of their income toward rent and utilities, the voucher covers the remainder up to the FMR’s limit. 

Special Needs Trusts 

Many people with disabilities have special needs trusts (SNTs) in place. Some individuals who establish SNTs may, for example, have received a sizeable settlement in a personal injury lawsuit. Because these assets are in an SNT, they can still qualify for needs-based government assistance like Medicaid and SSI.

Special needs trusts typically pay for goods and services that Medicaid and SSI do not cover. This may include such expenses as education, recreation, hobbies, and transportation. 

People with SNTs can also obtain Section 8 housing vouchers. However, withdrawals from a special needs trust can count as household income; in turn, this impacts how much one’s housing voucher will cover. The more income a household receives in a particular location, the less the voucher covers. For example, if an individual receives $200 monthly from a special needs trust, that is part of their household’s income. 

Often, trustees pay the beneficiary’s bills directly from the trust. Distributions from a special needs trust count as income whether the trustee gives the money to the recipient or uses trust money to pay the beneficiary’s bills. 

Assets do not disqualify households from Section 8. However, HUD uses the standard increase in asset value to calculate income. Annual income, per HUD, can affect the amount of one’s housing voucher. (Read more about income limits on the HUD website.)

How to Apply for Section 8 

Contact your local Public Housing Agency (PHA) to apply for the Housing Choice Voucher Program. HUD provides an agency directory online. 

Completing an application involves supplying documentation on your family composition, income, and assets. In addition, you will need to provide identification, your Social Security number, and proof of citizenship or immigration status. 

After applying, it can take months or even years to receive a voucher depending on how long the wait list is in your area. The need for vouchers typically exceeds government resources. The PHA may close the list when many families are waiting.

Speak with Your Special Needs Planning Attorney 

Note that different types of special needs trusts come with certain limitations. They also may follow different rules, depending on where you live. Be sure to work with your special needs planner when establishing a special needs trust.

Your attorney can also help you through the process of applying for the housing voucher program. They can help you determine how your particular SNT could affect your housing voucher.

DOCTORS QUIT? Is the Wall Street Journal becoming Faux News?

As Judy Lieberman of the Columbia Journalism Review reported on August 12th, the Wall Street Journal had printed a story called “More Doctors Steer Clear of Medicare: Some Doctors Opt Out of Program” on July 29, 2013, that last year, according to the Centers for Medicare and Medicaid Services, 9,539 physicians opted out of Medicare, up from 3,700 opting out in 2009. [A four-year period of time]

Dan Diamond of California Healthline looked at the same figures from the same source. What the Journal didn’t report is that also per CMS, the number of physicians who agreed to accept Medicare patients continues to grow year-over-year, from 705,568 in 2012 to 735,041 in 2013. [A one-year period of time]

A one percent drop of physicians wouldn’t be shocking given aging, retirement, sickness and death of physicians in the general population. But it is “shocking” if you write the story from an angle that sensationalizes and purposely attempts to mislead – not shocking that professionals get old and retire – but shocking that the WSJ is in danger of becoming a hack rag disguised as legitimate journalism.

The Supreme Court decision on the Affordable Care Act (ObamaCare) has tremendous implications for our practice, primarily negative, but is a huge boon to planning for persons with disabilities who have been shut out of the private insurance market in the past.  Our law firm’s loss is our clients’ gains, and we couldn’t be happier about it.

Depending on the November election, if Obama is re-elected, our clients with Special Needs Trusts will have the option to get off of public health programs, like Medicaid, and begin to pay for private health insurance from private health companies.  For the reasons mentioned in the attached "Commentary", we believe there are substantial resons why this will be appealing to many.  Whether, how and when to do it, however, will require a careful analysis of individual client’s needs.  Click the link below:

www.floridaspecialneedslaw.com/uploads/file/Lillesand – Commentary on the Impact of Affordable Care Act.pdf

We’re working on an appeal of another attorney’s client’s case that was lost at a Social Security Adminsitration Administrative Law Judge hearing.  In reviewing the twelve page decision, we find the judge wrote the following (the typos are ALL his):

"Rather, when examined by Dr. Miguel xxxx, a psychiatrist at the request of the office of Dislikable Dtermiatnos, the claim was fully oriented and his speech was coherent and relevant.  While he seemed anxious, he was attentive and denied any suicidal intention so r ideas.  He also denied any homicidal ideas.  There w err no signs of hallcuiotnsm delusions, bizarre behavior and his cognitive function was age aprpruioatpe. HTer ewe rno signs of hyperactive or attendtion difficulties.  he knew the date, his socials ruvity number and his abstract thinking was intact. (Exhibit 9)."

Where to start.  The Office of Disability Determinations, labeled not-so-inaccurately as the "office of Dislikable Dtermaitnos" is not even called that any more.  And on, and on.  It will make funny reading for the Appeals Council at least while we win this man’s case.

The PCIP program is now cheaper – premiums have been reduced.  PCIP is "Pre-existing Condition Insurance Program,"  a part of the Affordable Care Act (ObamaCare) that is currently available to persons who have been denied health insurance by private health insurance companies because of even minor health conditions.  It also insures individuals with significant medical issues who have been without health insurance for six months or more.  Some of our clilents who have funds are purchasing the PCIP health insurance (the same non-profit company that insures Congresspersons and U.S. Senators).  The coverage is excellent.  And the doctors are first class private physicians and hospitals – after all, Congress wrote this insurance for themselves and their families – Obama is just letting disabled persons and others previously excluded from purchasing insurance, to buy this insurance.

The new rates are significantly lower than what our law firm’s group health insurance costs: for a person age 32, our office policy costs $525 per month; the PCIP plan cost is $176 per month; for an employee age 48, our plan costs us $755 per month, and the PCIP is only $270 for even better coverage.

CLICK HERE for more descriiptions on how to sign up online for PCIP and the coverage and rates.  A full description of the program – about 81 pages – is available here.

The South Dakota Supreme Court decision attached actually pre-dates the U.S. Circuit Court of Appeals decision yesterday by a couple of weeks, but comes to the same conclusion, and further adds language that no state may avoid application of the federal rule:

“[¶ 44.] In a CMS memorandum from Gale P. Arden, Director of Disabled and Elderly Health Programs Group at the Center for Medicaid and State Operations in Baltimore, the transfer penalty and pooled trust statutes at issue in this case were clarified. See Memorandum from Gale P. Arden to Jay Gavens, Acting Assoc. Regional Adm’r, Div. of Medicaid and Children’s Health (Apr. 14, 2008). In part, the memorandum stated:

Although a pooled trust may be established for beneficiaries of any age, funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than fair market value. When a person places funds in a trust, the person gives up ownership of the funds. Since the individual generally does not receive anything of comparable value in return, placing funds in a trust is usually a transfer for less than fair market value. The statute does provide an exception to imposing a transfer penalty for funds that are placed in a trust established for a disabled individual. However, only trusts established for a disabled individual 64 or younger are exempt from application of the transfer of assets penalty provisions ․

“Id. (emphasis added). CMS issued this memorandum because “it was brought to [its] attention that in many States individuals age 65 or older are establishing pooled trusts, but the States may not be applying the transfer of assets penalty provisions as required by statute.” Id. The memorandum explain[ed] that “[i]f States are allowing individuals age 65 or older to establish pooled trusts without applying the transfer of assets provisions, they are not in compliance with the statute. [F]ederal statute requires the application of the transfer rules in this situation; it [is] not a decision for each State to make.”8 Id.”

The United State Circuit Court of Appeals for the Eight Circuit ruled today in Center v. Olson  that persons age 65 and over cannot place funds in a pooled trust without serving a penalty first.  This decision aligns Medicaid eligibility to the position that the Social Security Administration has taken with regard to maintaining SSI eligibility from the very first rules that come out in 1999.

To read the decision click HERE

Although the decision will impact elders seeking to transfer costs of nursing homes to state Medicaid agencies, it does not prevent disabled persons under age 65 from retaining SSI Disability and SSI-related Medicaid.  SSI payments switch automatically from "disabled" to "elderly" when the disabled individual has his or her 65th birthday.  Assets deposited into an individual or pooled Special Needs Trust prior to age 65 continue to be exempt and will not prevent SSI and SSI-related Medicaid eligibility.

We remain available to attorneys and individuals seeking assistance in attaining SSI and Medicaid eligibility and understanding how this decision may or may not affect them.  David@LillesandLaw.com (727) 330-7895.