If someone was injured on the job, in a car accident, or in some other fashion, he or she may receive a large personal injury settlement. Often, large settlements are gone within a few short years if not managed properly. Luckily, there is an option that can help beneficiaries to receive the care they need for many years by properly managing any money received in a settlement.
What Is a Settlement Trust?
A settlement protection trust is a type of support trust. It is meant to support the beneficiary by taking care of his or her needs in regards to education, health, and basic life needs. It may include help with things like buying a vehicle or home. Typically, these trusts are for people who are not receiving any government benefits. They may have a case manager who helps the beneficiary use the money responsibly.
What Are the Benefits of a Protection Trust?
There are several advantages to creating a protection trust for someone.
- Asset Protection – The average settlement is gone within five years, but a trust prevents the recipient from spending too much money too quickly, creating a safety net that lasts much longer.
- Care Management – If the injured party requires ongoing care, the trust will ensure that that care is of the best quality.
- Money Management – Depending on the size of the trust, an expert in money management may be a vital asset.
- Structured Settlement – If the settlement is structured, the trust can ensure that payments go into it and prevents the recipient from selling the structured settlement in the future.
- Tax Preparation – Filing taxes is often complicated and having a trust just amplifies that. A trustee can prepare the taxes to ensure they are done the right way.
Beyond that, a trustee can help to supervise such situations as buying or modifying a home, purchasing a vehicle, and otherwise navigating the system in terms of needs- or non-needs-based government benefits.
Is a Settlement Trust a Good Alternative to Guardianship?
Having a guardian is considered an intrusive form of protection and is generally a last resort. If someone has an injury settlement and would like to be as independent as possible, a settlement trust is an excellent alternative to guardianship. It allows someone to make his or her medical and financial decisions within reason while preventing someone from overspending and ending up without the money they need to survive.
How Is a Protection Settlement Distributed?
There is a lot of flexibility in how distributions are made from a protection settlement. Typically, a professional creates a budget, and the trustee provides the beneficiary with a specific amount of money each month. However, some beneficiaries prefer to give the bills to the trustee and have him or her pay them. The goal is to ensure that the money lasts as long as possible. This means that most beneficiaries do receive a “fun” spending budget each month but cannot overdo it by living an overly luxurious life.
Money goes quickly if someone isn’t adept at managing it well. A settlement protection trust that has a responsible trustee in charge of it helps to ensure the beneficiary of a personal injury settlement gets the help he or she needs and lives a comfortable life.