Settlement Protection Trusts
Settlement Protection Trusts are intended for clients who are not already receiving public benefits like SSI, SNAP, Medicaid, or other government-funded programs. This type of trust is typically used for minor children. Under a Settlement Protection Trust, a natural parent or legal guardian is able to access the funds from the settlement to be used for health, education, ongoing maintenance, and support of the minor.
The funds in a Settlement Protection Trust are to be used for the sole benefit of a child and are typically not available for what the law considers to be “normal expenses of parenting.” These funds can be used for medical bills, extracurricular activities, education, dentistry, or other things qualifying under the quality of life. Establishing a Settlement Protection Trust can help a parent or guardian avoid expensive court costs, attorney fees, and other things associated with guardianship. States vary in governing how a child’s money should be handled.
This type of trust can also be used in situations where the client is deemed incompetent or unable to manage his or her own finances. While many clients believe the best option is to receive the settlement outright in a lump-sum, there are many advantages to a Settlement Protection Trust. The average large personal injury settlement that is paid to the plaintiff as a lump-sum lasts less than five years. Having a Settlement Protection Trust can keep funds available for a longer duration of time, even a lifetime. These trusts can be designed so payments from any structured settlements are directly deposited into the trust.
Settlement Protection Trusts allows for care management arrangements if needed. If care is needed, a trustee can hire a care manager for the injured party. This care plan can be modified over time, as needed. Trustees can also assist with big purchase decisions such as buying a home or purchasing a vehicle. They can even help with navigating a government benefit program, as necessary.
Distribution of funds can be very flexible under a Settlement Protection Trust. It’s easy to prepare a budget which can be dispersed to the claimant on a monthly basis or as needed. A Settlement Protection Trust is best used in instances where a minor or an incapacitated person is the injured party or when facing a large settlement.
Are you interested in learning more about a Settlement Protection Trust? Contact Cantrell Consulting today for more information.