Settlement Preservation Trust
When a person receives a settlement, such as from a personal injury or wrongful death lawsuit, it can have several implications. These settlements often cover many future losses, sometimes for years to come, but the recipient gets all the money at once. They will need to properly manage the money, so they have the financial support they need moving forward. Many people need assistance with this management, so they do not waste or otherwise lose the funds too soon.
A settlement preservation trust (SPT) can help keep settlement compensation safe and maximize its benefits. These legal tools might also be called Personal Injury Settlement Protection Trusts or Settlement Management Trusts. Settlement recipients must take specific steps to form a trust and preserve their compensation over time.
Directed Benefits Foundation provides comprehensive settlement preservation trust administration for beneficiaries, their families, and their representatives. Our highly experienced team is dedicated to efficiency and transparency in our trust administration, which enables us to help thousands of beneficiaries each year. The obvious goal is to preserve settlement proceeds, and while there are several aspects to how SPTs can preserve settlement proceeds, they all fall under the general heading of preventing wasteful dissipation
What is wasteful dissipation?
Unfortunately, it is not uncommon for settlement proceeds to be depleted very quickly. Like lottery winners, there are a significant number of injury claimants who are simply inexperienced with large sums of money. They tend to spend their settlements quickly because they have no sense of how long the money will last. Sometimes, this dissipation is simply an indication of the spendthrift tendencies of the settlement recipient.
Not all beneficiaries exhibit spendthrift tendencies, but depending on the situation, personal injury victims can get behind on normal household bills and incur debt if they experience periods of unemployment while waiting for cases to settle. They may also have ongoing medical needs because of the accident. They might not consider how to allocate their settlement funds, and they might deplete the settlement quickly, trying to get ahead without a proper financial strategy.
Undue influence is another cause of wasteful dissipation. When someone in the family gets what seems like a windfall, other family members might take notice, even if the funds are compensation for a serious injury or death. It can be as subtle as a sister asking for a little financial help with a nephew’s college tuition, or a cousin might request help with legal fees for a divorce. Others can be much more demanding and coercive, and the injury claimant might not realize they are being unduly influenced until it is too late, and the money is gone.
Perhaps the worst example of undue influence is exploitation. Especially susceptible to exploitation are those with addictions, adults with mental or physical disabilities, older adults who are frail or have memory problems, and minor children. The abusers can be anyone: friends, family members, neighbors, and even paid care providers. While abusers may be subject to criminal prosecution, the better alternative is to avoid situations where exploitation may occur.
Often, a claimant feels the need to accommodate everyone and winds up with nothing to show from the settlement except unmet needs. They might also believe they were able to manage their funds until they realize they have little left for the next years or decades. In any situation, wasteful dissipation can eat through a settlement if the money does not have proper protections.
A professionally managed settlement preservation trust can prevent a beneficiary’s proceeds from being jeopardized by exploitation, undue influence, or spendthrift tendencies. At DBF, we employ various strategies such as pre-determined distribution schedules and disciplined management, which will ensure that the beneficiary’s more important needs are identified early and provided for on a consistent basis.
If you have a personal injury or wrongful death settlement and you have any doubts about its long-term management and preservation, reach out to our team to learn more about our settlement preservation trust services.
Limited Medicaid Protection
Unlike special needs trusts (SNTs) and pooled trusts (PTs), SPTs are not specifically described or authorized in federal law. They are not used to protect public benefits like Social Security Income or Medicaid generally, though SPTs may protect certain types of Medicaid eligibility under the right circumstances. To discuss the possibility of limited Medicaid protection with a settlement preservation trust, reach out to our team of SPT administrators today.
When you have a properly formed SPT with the right administration, you can enjoy many benefits. First, you have the relief that you will not have the responsibility to manage your settlement funds and question your decisions. You can focus on your injuries, and we will focus on your settlement management.
Settlement Preservation Trust Administration You Can Trust
Once you decide to form a trust to protect your injury or wrongful death settlement, you need someone to administer the trust and serve as the trustee. Such parties have a fiduciary duty to you, as they have a major responsibility over your financial future.
Directed Benefits Foundation provides trust administration services for settlement preservation trusts, and we can assess your best options. Reach out today for more information about SPTs.