A construction worker from Brooklyn falls from a scaffold. After months of negotiation, his personal injury lawyer secures a seven-figure settlement. The relief is immense, but what happens next is just as critical. Too often, I see families deposit a life-altering sum into a standard checking account, believing their work is done. In reality, the work of stewardship has just begun.
The personal injury attorney’s job is to maximize the recovery for a client’s pain, suffering, and lost wages. My job, as an estate planning attorney, is to ensure that recovery serves its purpose for the rest of our client’s life—and often for the generation that follows. A large, unprotected cash award is vulnerable. It can be exposed to future creditors, matrimonial disputes, or poor financial decisions. This is not a lottery win; it is a replacement for a lifetime of lost health and earnings, and it must be protected with deliberate intent.
Protecting Your Settlement and Your Benefits
An immediate challenge is the settlement’s effect on eligibility for needs-based government benefits. Programs like Medicaid and Supplemental Security Income (SSI) have strict asset limits. A settlement that pushes an individual’s assets over these thresholds can cause an immediate termination of benefits—the very benefits they might rely on for ongoing medical care.
This problem is solvable, but it requires planning before the settlement check is cut. For these situations, we establish a specific legal instrument known as a Supplemental Needs Trust (SNT), sometimes called a Special Needs Trust. Under New York’s Estates, Powers and Trusts Law § 7-1.12, these trusts are an established tool for holding settlement proceeds without disrupting eligibility for critical government assistance.
The settlement funds are paid directly into the SNT, which is managed by a trustee you select. The trustee—a person or institution with a fiduciary duty to act in your best interest—can then use the funds to pay for expenses that enhance your quality of life. These can include physical therapy, home modifications, education, and transportation. Because the assets are held by the trust and not by the individual, they are not counted for Medicaid or SSI eligibility. The plan is a contingency for a future you cannot predict.
From Windfall to Generational Legacy
A settlement should provide security for a lifetime. But what happens to any remaining funds when the injured person passes away? Without a proper structure, that money becomes part of their estate and must pass through the Surrogate’s Court probate process. The distribution becomes public record, and the assets are paid out to heirs directly, where they are again exposed to the heirs’ own creditors, divorces, or financial mismanagement.
By integrating the settlement into a broader estate plan, you dictate its future. The funds can remain in a trust for the benefit of a surviving spouse, providing for their care without giving up control. They can be structured to pass down to children in a protected way, perhaps distributing over time at certain ages or for specific purposes like education or a down payment on a home. This is the difference between a short-term financial fix and the foundation of a lasting family legacy.
The personal injury lawsuit addresses the harm that was done. A prudent estate plan addresses the future that is yet to be built. It ensures the compensation received fulfills its ultimate purpose: providing lasting security and stability for your family.
Before you or a family member finalizes a settlement, understand the long-term implications for your estate. We often work with a client’s personal injury counsel to ensure the payout is structured correctly from the outset. If you anticipate receiving a significant award, schedule a confidential meeting with our firm to design the trust and asset protection framework your recovery deserves.
