Finances

Traumatic brain injury can be as catastrophic financially as it is physically and emotionally. The person with traumatic brain injury may no longer be able to work, or a family member may need to leave her job to become a fulltime caregiver.

Although navigating the financial system can be incredibly frustrating and time-consuming, your future can depend on mastering the fine points of personal finance, health insurance, government benefits, and the law. Unfortunately, you or your family members need to start thinking about finances as soon as possible after the injury.

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What to Know About Trusts and Structured Settlements After Brain Injury

Ask the Expert: What to Know About Trusts and Structured Settlements After Brain Injury
We need to protect that money so that those funds are around during the course of your son's life. If your child is under the age of 18 or 21, in most states, the child won't be able to get the money until they reach the age or majority. So initially the funds are protected by the court system, and in many cases they're put into CDs that are insured so that the money is there. But a more interesting question comes about when that individual turns 18 or 21 and they become emancipated and can make decisions for themselves about the use of those funds. I would hate to put a lot of money in my 18-year-old's hand because I'm afraid of some of the decisions that they might make and how they might decide to spend that money. We want to make sure that that money is there for the rest of their lives. So one thing that you need to discuss with your attorney is the use of what we call a 'structured settlement.' Instead of money going directly to the individual in cash, a big lump sum of money, money can be paid over time. The money is given to a major life insurance company and is protected by different guarantees, by state guarantee funds. So if that life insurance company went out of business for some reason, there would be protections available and the money wouldn't be lost. Those funds can be paid out on a monthly basis. They can be paid out on a yearly basis. They can be paid out over a lifetime. They can be paid out in intervals to pay for college if necessary. You can be as creative and innovative as you want. I will give you some examples that we have used with children who have had brain injuries. What we have done is we provided college funds that are available in lump sums when that child is 18, 19, 20, and 21, to pay for school. If we needed funds to pay for private schooling before that time, we figured out what those funds are going to cost-- what that school is going to cost over the course of many years, and we've had that money come in every year in September that paid for that schooling over time. We have protected funds for adults with traumatic brain injuries who are no longer able to work, and we've figured out what amount of money we need to replace to equal the amount of money that they lost as a wage earner. And we've provided that funding to them on a yearly basis, paid out monthly, and we account for inflation by putting cost-of-living increases of 3 or 4 percent a year into the bundle. We've also protected these funds so that if people need money for contingencies that they can't think of when they're going through this program, that we have lump sums coming due over periods of time to provide for these extras that are needed. And we work in these areas with financial planners who can look into the future and project these numbers that we need. The one nice thing about a structured settlement is that the money that the people get over time is tax-free. Each payment is tax-free, as if they got all their money up front, which would be tax-free, as well. So we don't have to worry about taxes, and we get the beauty of compounding, which works very well in these programs. We also have to talk about how to protect money so that the individual is still entitled to government entitlements. And we call this protection the creation of a Supplemental Needs Trust or some jurisdiction score to Special Needs Trust, where money is not given to the individual directly, because when we do that, now the individual is deemed to have been in receipt of income, and that makes them ineligible for Medicaid benefits, or other government programs that are needs based, income based. So we put this money in a trust, and really anybody could be the trustee. It could be the individual's spouse. It could be the individual's family member, mother, father, close friend. It could be an individual along with the bank that are co-trustees. And essentially, this Supplemental Needs Trust, or Special Needs Trust, says that this trust will fund anything and everything for the individual except those benefits that are provided by the government. So if the government will provide medical expenses, this trust won't fund medical expenses. If the government will provide housing resources, this trust won't fund housing. If the government will provide food and shelter, clothing, this trust won't do that. But what can the trust do? It can provide for vacations. It can provide for things around the house. It can provide the van that nobody will pay for. It can provide the entertainment that's so important for the individual. It can provide reading material for the individual. It can provide assisted living devices that can't be purchased with government assistance. So these funds are there, in essence, to supplement what the government will provide and allow a person to live freely or independently, or in what we like to call 'the least restrictive environment possible,' but also still be eligible for government support benefits. Not only do parents have to think about this when they get funds for an individual as a result of a settlement of a lawsuit, but they have to think about what happens when they're no longer there to provide for the individual. They have to do what we call 'estate planning,' and they have to do it now. They have to create these trusts now with them, so that when they do pass away, instead of the money flowing directly to their child or their spouse, it goes into the Supplemental Needs Trust to provide the protection that they need.

Planning Your Estate

Ask the Expert: Planning Your Estate
What you need to mention to your attorney and discuss with them is the creation of a supplemental needs trust or what many people call a special needs trust. Usually the proper attorney to speak to about that are attorneys who specialize in the field called elder care, working with senior citizens, because we're talking about the same issue, which is protecting the assets so that the individual is still entitled to government benefits such as Medicaid or Medicare benefits. And what we're trying to do is ensure that the person who gets money still passes the needs or income test imposed by the government to see if they're eligible for these programs. So what we need to do is segregate these funds into a trust called a special needs trust or a supplemental needs trust that's created that will shelter the money rather than have the money go directly to the individual. And the whole purpose of this trust is in short to say this trust will fund programs that the government won't fund. So if a program will fund housing for an individual, this trust won't fund housing. If the government will pay an individual's medical or rehabilitation expenses, this trust won't do that. If the government will provide clothing for an individual, this trust won't provide clothing. What will the trust do? This trust will buy a van for the individual if they need transportation, special assistance. This trust will pay for family trips and vacations for the individual, take care of things around the house. This trust will in short do everything that the government can't do for a person, which is very important for the person to live independently and have a life that is meaningful. It's not enough that a person just live at home and watch TV all day. They have to have an existence that is a meaningful existence, and this trust will provide the funds to do that for an individual and yet still allow that individual to receive all their government entitlements.

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