13 Dec Can a lawsuit payout be shielded from Medicaid?

Q. My lady friend is covered by Medicare and Medicaid. She currently has a lawsuit claim because her dog was mauled by a neighbor’s dog. If she receives money from her lawsuit, how can she shield it from Medicaid?
— Trying to help

A. This is a tough one because the specifics matter.

There are several types of Medicaid programs in New Jersey.

One of the programs is based on income and the others are based on income and assets, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

“If she is receiving income-based Medicaid, then the receipt of funds from the lawsuit may not affect her eligibility for Medicaid benefits,” Whitenack said. “If she is receiving Medicaid because she is 65 or older or she is blind or disabled pursuant to the Social Security Administration’s definition of disability, then her continued eligibility may be adversely impacted by the receipt of the funds.”

Whitenack said if she is under the age of 65, she could establish a special needs trust to shelter the assets and continue to receive Medicaid.

“If she is disabled and the onset of her disability occurred before she was 26 years old, she could also shelter up to $17,000 in 2023 and $18,000 in 2024 in an ABLE account,” she said.

Your friend should consult with an elder and special needs attorney to determine her options.

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This story was originally published on Dec. 13, 2023.

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