As a new lawyer handling (what I assumed was) an easy settlement disbursement meeting on a small personal injury case, I vividly recall learning that the client was on Supplemental Security Income (SSI), and then leaving the room to ask one of our firm’s estate planning and elder law attorneys, “Is this going to be an issue?”

Aside from having the good – and increasingly rare – fortune of being part of a general practice firm where I could ask that question, I had to return to the conference room and sheepishly tell the client that I could not give her the settlement funds today, and that we needed to discuss creating a special needs trust.

Over 10 years removed from that experience, I believe it is worth highlighting for those in the personal injury practice area these public-government benefit issues, so practitioners in these areas can at least identify potential issues early on, properly inform their client of these potential collateral consequences, and consider potential mitigation strategies when appropriate.

We so often focus on subrogation claims, outstanding medical expenses, and what our client’s net will be, that it is easy to miss when that client’s net payment may be a net negative.

Income-based vs. Asset-based

The major players, when discussing this topic, fall roughly into three baskets:

• health care;
• Supplemental Security Income (SSI); and
• FoodShare (SNAP).

For health care in Wisconsin, that category further breaks down into:

• Medicare;
• Badgercare Plus; and
• traditional Medicaid (aka Medical Assistance or SSI-Medicaid).

The easiest way to think about whether a personal injury settlement is going to affect eligibility for these programs is whether the program is income-based, asset-based, or both.

If the program is income-based only, settlement is very unlikely to have an adverse effect on eligibility. The IRS (and Wisconsin taxing authorities) do not consider personal injury settlements or judgments to be “income.”

That said, it is always a good practice to check the program’s definition of “income.” If program eligibility is asset-based, that is a situation where a settlement or judgment can have an adverse effect.

To start, Medicare and Badgercare Plus eligibility are not going to be affected by a personal injury settlement. Badgercare Plus is income-based and not asset-based; Medicare eligibility is unaffected by personal injury settlements or judgments, and its premiums are based on modified adjusted gross income, not assets.

The one caveat^[1] with Medicare is that, if there is future injury-related treatment needs and funds are awarded for such, you and your client are required to take Medicare’s future interests into account, e.g., Medicare Set-Aside.

Just as with Medicare eligibility, personal injury settlement funds do not affect Social Security Disability Insurance (SSDI) eligibility.

On the other hand, what is known as traditional Medicaid, or sometimes referred to as SSI-Medicaid or Medical Assistance, is asset-based and income-based. For 2025, the single asset limit for Medicaid, is $2,000 and $3,000^[2] for a married couple. These Medicaid asset limits also apply to normal SSI eligibility.

For FoodShare, through Sept. 30, 2025, the asset limits for non-elderly, blind or disabled was $3,000 and $4,500 for elderly, blind, or disabled.

What To Do If Your Client Has an Asset-Based Benefit and Is Receiving a Settlement?

First, is the settlement large enough that the client isn’t going to be substantially affected by loss of the benefit? For example, if someone is getting a significant settlement for their injuries, they are often OK, and understand that they are going to be ineligible for asset-based benefits.

However, where this becomes a more salient issue is when the client’s net settlement is more modest, and they are on SSI and SSI-Medicaid. In that scenario, receiving a smaller settlement can have real and immediate negative consequences. What are those clients supposed to do?

As the lawyer holding the funds in your trust account, you may have a client ask you to pay the funds to a friend or family member to “hold” for them. Such a suggestion is obviously not a good idea and illegal; indeed, the client likely has reporting obligations (often 10 days after receipt) to these asset-based programs.

However, there is a legal way to shield the money from being a countable asset: a Special Needs Trust.

Special Needs Trusts (SNT) are not countable assets for asset-based programs, and can be set up with a friend or a family member as the trustee. To qualify for a SNT, the person must meet a definition of disability, or be over 65, which is likely already the case if the individual is receiving asset-based benefits. For a privately created SNT, the person does not need a formal disability determination by the Social Security Administration (SSA), but must meet the definition of “aged, blind, or disabled individual,” provided by 42 U.S.C. 1382c.

Another option is a pooled special needs trust, such as offered by Wispact, which has a fee grant program that can pay legal and application fees for setting up the SNT. For a Wispact SNT, the individual needs to be disabled per SSA. I have had clients successfully navigate the fee grant process and have their attorneys’ fees paid for creation of the Wispact SNT.

A whole article could be written on the specifics of SNT eligibility and what those funds can be used to purchase. In an extremely general sense though, SNT funds are not paid to the beneficiary, but rather the trustee purchases the items or services for the benefit of the beneficiary. And while there are restrictions on what can be purchased with the funds, there is latitude within the categories, such as transportation (i.e., buying a car) or recreation & leisure (taking a vacation) that enables relatively broad use of the SNT funds.

Practice Pointers

Identify these issues at the outset of representation. Ask your clients what programs or benefits they are receiving. Do better than the 2013-version of the author, who didn’t know until settlement time.

Do not rely solely on your client – you need to investigate. As noted above, this area is an alphabet soup of acronyms, and many programs sound similar. There is a huge difference between a client on Badgercare Plus (which clients call Medicaid) and SSI-Medicaid.

If there is an issue or you suspect an issue with an asset-based benefit, reach out to an attorney that specializes in estate planning, Medicaid planning, or special needs trusts. An attorney that specializes in this area can help you assess whether you indeed have an issue, whether it is practical to consider planning strategies, and what those strategies may be.

Endnotes

[1] Future Medicare treatment and Medicare Set-Asides is a voluminous and debated topic not addressed here. This article simply covers the general up-and-down eligibility for benefits, not whether specific future injury-related treatment is covered or denied. ↩

[2] When both spouses are receiving Medicaid benefits. ↩