Will A Special Needs Trust Trump An ERISA Subrogation Interest?

The Court of Appeals for the Fifth Circuit has ruled that the assets held in a special needs trust created out of the proceeds of a personal injury settlement are not available to satisfy an ERISA subrogation interest.

The Court held that the injured plaintiff never had possession or control over the money.  The Court also determined that the trust and trustee could not be sued because the only asset in the trust was the right to future periodic payments in an annuity held by another.

The case is ACS Recovery Services, Inc. v. Griffin,  No. 11-20266 (5th Cir. April 2, 2012).   Footnote 4 of the opinion distinguishes a decision from the 8th Circuit involving a special needs trust.

Will this work in the 6th Circuit?  Apparently there is no case on point.  However, this opinion does a nice job reviewing the USSC opinions on the subrogation issue when ERISA controls and offers a step-by-step guide on how to avoid a subrogation interest in the 5th Circuit.


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