A construction worker falls from a scaffold in Queens. He survives, but with injuries that mean he will never work again. After a long fight, his attorneys secure a significant settlement. The family breathes a sigh of relief, believing their financial worries are over. In my experience, this is where a new set of challenges begins. The settlement is not a lottery win—it is a calculated sum meant to replace a lifetime of lost wages and pay for decades of future medical care. The most critical question becomes: how do you steward this money so it lasts?
A Settlement Is a Replacement, Not a Windfall
When a client receives a personal injury award, the first thing we discuss is the purpose of those funds. The number on the check might seem enormous, but it is an amount meticulously calculated by economists and legal professionals to cover specific, anticipated costs over a person’s lifetime.
These funds are meant to function as a replacement for:
- Lost Future Earnings: The salary and benefits the injured person would have earned had they been able to continue their career.
- Ongoing Medical Care: This includes everything from surgeries and physical therapy to prescription medications, home health aides, and specialized equipment—potentially for the next 40 or 50 years.
- Pain and Suffering: A monetary acknowledgment of a permanent change in one’s quality of life.
Viewed this way, the settlement is a lifeline, not a luxury. A single imprudent decision—a bad investment, a generous gift to a relative, an expensive purchase—can jeopardize the very financial security the settlement was meant to create. Stewardship is paramount.
Protecting Assets While Preserving Benefits
One of the most immediate challenges involves government benefits. Many New Yorkers with disabilities rely on needs-based programs like Medicaid and Supplemental Security Income (SSI). A large cash settlement can instantly disqualify them from these essential services, forcing them to spend down their award on medical care that would have otherwise been covered.
Here, prudent planning is essential. For these situations, we often establish a specific type of irrevocable trust called a Supplemental Needs Trust (SNT). The settlement funds are paid directly into the trust, not to the individual. Because the assets are held by a trustee with discretion over distributions, they are not counted as a resource for Medicaid or SSI eligibility.
The trustee—a person or institution with a fiduciary duty to act in the beneficiary’s best interest—can then use trust funds to pay for expenses that enhance the beneficiary’s quality of life. This can include an accessible home, a modified vehicle, education, and other services not covered by public benefits. The trust acts as a protective shield, allowing the settlement to supplement, rather than replace, the public safety net.
When Injury Leads to a Wrongful Death Claim
Tragically, not every personal injury victim survives. When an accident is fatal, the legal action becomes a wrongful death claim, and the intersection with estate law is direct. In New York, under Estates, Powers and Trusts Law (EPTL) § 5-4.1, a wrongful death action must be brought by the personal representative of the decedent’s estate—the executor named in their will or an administrator appointed by the Surrogate’s Court.
The proceeds from the claim become an asset of the estate, but they are not distributed like other assets. The funds are earmarked specifically for the decedent’s surviving family members who suffered financial losses due to the death. The Surrogate’s Court must approve the settlement and determine how the funds are allocated among the distributees, such as a surviving spouse and children.
Without a will, this process is governed by state intestacy laws, which may not reflect the decedent’s wishes. This is why a foundational estate plan is critical, even before a crisis occurs. It establishes a clear framework for who is in charge and provides guidance during an incredibly difficult time.
The work of a personal injury attorney is to secure the recovery. Our work is to ensure that recovery serves its intended purpose for a lifetime, or for generations to come. The two are inextricably linked.
If your family is expecting a settlement from a personal injury or wrongful death claim, the time to structure its protection is before the check arrives. I invite you to schedule a consultation with our firm to discuss the prudent use of trusts in preserving these critical assets.
