Key Benefits of Establishing a Personal Injury Settlement Trust
A settlement trust enables the injured party to retain government assistance like Medicaid and SSI without jeopardizing those benefits. It can be set up in many ways and usually, be a bare or life interest trust.
Putting compensation into this type of trust means it will not be counted for means-tested purposes, including care home fees. It will also protect the funds from squandering and ensure they last their lifetime.
Most personal injury settlements are non-taxable; one and a trust can ensure that all of the funds you receive will be protected from taxes. This can help you preserve the full value of your settlement, ensuring that it will last for as long as possible.
Suppose you or someone you love has a disability. In that case, the influx of money from your personal injury settlement may jeopardize your eligibility for means-tested benefits such as Medicaid, SSI, Section 8 housing, and SNAP (Food Stamps). Establishing a special needs trust allows you to segregate the income from the settlement without risking your public assistance eligibility.
Trusts can also arrange for expert money management. This can prevent the squandering of the settlement proceeds by unscrupulous spouses, significant others, friends, and family members.
A personal injury settlement trust is a legal arrangement that places a portion of a plaintiff’s compensation award under the care of a fiduciary, who is responsible for preserving the funds for the benefit of the beneficiary. Whether the beneficiary needs help managing funds, protection from those who may take advantage of them, or assistance with purchasing a home, car, or medical equipment not covered by means-tested public benefits like SSI and Medicaid waiver programs, a settlement management trust can provide solutions.
A Tulsa personal injury attorney can establish a trust to hold and manage funds received through a lawsuit or settlement. While a trust does come with some upfront costs, it is generally cheaper than implementing a conservatorship in court. This is a great option for those who are vulnerable, young, or unfamiliar with handling large sums of money.
Protection of Assets
Injured parties often need to be more sophisticated in handling a large influx of money from a settlement or award. A settlement protection trust can arrange expert money management. Trustees must act in your best interest and are usually chosen by you.
In addition, the trustees can prevent your assets from being squandered or coveted by significant others or family members. Trusts can be revocable or irrevocable. Typically, you will want to make the trust irrevocable.
Assets held in a settlement protection trust are out of reach of most creditors. However, a creditor may be able to sue your business assets if the business is sued by its debtors. If you intend to use your settlement to invest in a business, it’s important to protect your assets by creating a separate business entity.
Injuries can occur from a variety of causes. Some of these injuries lead to a settlement or award that cannot be paid directly to the injured party. A personal injury attorney may recommend using a trust in these cases.
Trusts can be established to protect assets from creditors, lawsuits, and divorce. These types of trusts are known as self-settled irrevocable trusts.
A discretionary trust is another type of trust that allows trustees to distribute funds based on the beneficiary’s needs. These beliefs can also be designed to provide long-term care and assistance. A Settlement Protection Trust with special needs provisions can be established if the injury victim needs public benefits.
Eligibility for Public Benefits
A personal injury lawsuit is often necessary for people with permanent disabilities resulting from car accidents, medical malpractice cases or other incidents. However, these settlements can jeopardize their eligibility for need-based programs like Medicaid, SSI, Section 8 housing, and SNAP (food assistance).
A special needs trust is essential when money from a personal injury settlement exceeds income and asset limits for certain government benefits. A first-party settlement preservation and special needs trust, sometimes called a “self-settled” special needs trust, can be established to ensure that funds from a Medicare set-aside account and the remainder of the settlement are excluded from consideration for means-tested benefits. This type of trust also preserves eligibility for Medicare coverage, copayments, and deductibles. This is only an option for some clients.