Medicare Set-Asides Trusts (MSA’s) allow injury victims to rest more easily knowing that they have considered Medicare’s best interests when settling their workers compensation, and now, liability claims. Many MSA’s are funded with a combination of up-front (seed) money and annual structured settlement payments. Structuring the annual payments to be paid into the MSA will almost always reduce the cost of funding the MSA when compared to an all-cash funding of the MSA. Consider the example below:
Tom is a 51 year-old male who was in a motor vehicle accident. Because Tom’s settlement was modest and he doesn’t want to allocate more of his settlement recovery than necessary to funding the MSA, Tom’s attorney has a MSA Allocation Report prepared by one of many providers of this service. Tom’s MSA Allocation Report indicates that he needs to fund an MSA with seed money of $26,000 plus annual payments of $2500 for the remainder of his life expectancy (30 years). If Tom were to use his settlement monies to fund the MSA in cash, he would need to contribute $101,000 ($26,000 plus $2500 times 30).
By using a structured settlement, Tom can fund the MSA for $78,809 ($26,000 seed money plus $52,809 to fund the annuity). That’s a savings of $22,191 that Tom can use for other purposes and sleep comfortably knowing that he has safely considered Medicare’s best interests when resolving his claim.
And it gets even better for Tom. Because of his past medical history, Tom’s attorney had his plaintiff structured settlement broker medically underwrite Tom for a Rated Age. One of the annuity markets assigned a rated age of 60 to Tom and that lowered the cost of the annuity to just $43,501. Tom was able to fund the MSA for just $69,501 instead of $101,000. Structuring the MSA and using the Rated Age freed up $31,499 for Tom to use as he pleases.