A jury in Brooklyn awards a life-changing sum to an injured client. The litigation is over, the checks are cut, and the fight seems to be won. But for the families I represent, this is often the moment a new and more personal challenge begins—the fight to protect that award for a lifetime.
A settlement isn’t just a windfall. It is a replacement for what was lost: the ability to earn a living, the cost of future medical care, compensation for a permanent change in one’s quality of life. When a seven-figure wire transfer hits a personal checking account, that money is immediately exposed. It can be lost to creditors, to a future divorce, to well-meaning but ill-informed relatives, or simply to mismanagement. More critically, it can disqualify the injured person from the very government benefits they depend on for ongoing care.
My work often begins where the personal injury attorney’s work ends. The goal is no longer to win the case, but to create a durable structure for the proceeds. Stewardship.
From Award to Asset: The First 90 Days
The period immediately following a settlement is critical. The first instinct is often relief, followed by a desire to spend or invest. But the most prudent first step is to pause and create a plan. The goal is to use the funds for their intended purpose—the beneficiary’s long-term care and well-being—without disrupting essential support systems.
For many injured New Yorkers, means-tested government benefits like Medicaid and Supplemental Security Income (SSI) are indispensable. A large cash settlement will immediately push an individual over the strict asset limits for these programs. I have seen clients lose their Medicaid coverage—the very coverage they need for prescriptions and therapies—the month after receiving their settlement check. The victory in court becomes a loss in life.
This is an entirely avoidable outcome. The law provides a specific tool for this exact contingency: a Special Needs Trust, sometimes called a Supplemental Needs Trust. This is not a loophole; it is a legally recognized and intentional structure designed to hold settlement funds for the benefit of a person with disabilities.
The Supplemental Needs Trust: A Legal Firewall
A Supplemental Needs Trust (SNT) is a specific type of irrevocable trust that holds assets for a beneficiary with a disability. When structured correctly, the assets inside the trust are not considered “countable assets” for Medicaid eligibility. The beneficiary can continue receiving government benefits while the trust funds pay for expenses those programs do not cover.
In New York, these trusts are governed by laws including EPTL § 7-1.12. A first-party SNT is one funded with the beneficiary’s own money, such as a personal injury settlement. The rules are strict: the trust must be established for the sole benefit of the disabled individual, who must be under age 65 when the trust is created and funded. It must also include a provision that, upon the beneficiary’s death, any remaining funds will be used to reimburse the state for Medicaid expenses paid on their behalf.
The trustee—the person or institution managing the trust—has a fiduciary duty to act in the beneficiary’s best interest. They can make distributions for a wide range of needs that enhance the beneficiary’s quality of life: physical therapy, specialized equipment, accessible transportation, education, and even recreation. The trust acts as a firewall, protecting the settlement from being quickly depleted by the high cost of primary medical care while allowing it to be used for everything else.
Beyond the Trust: Building a Generational Plan
Protecting a settlement is about more than just preserving benefits. It’s about legacy. A properly managed award can provide security not just for the injured individual, but for their family as well. Once the SNT is established to secure the beneficiary’s lifetime needs, we can look at the broader estate plan.
What happens to any remaining funds? How are they passed to children or a spouse? A deliberate estate plan works in concert with the SNT. It may involve a will that directs assets appropriately, or other trusts designed to protect funds for the next generation. We might create a separate trust for the children, funded by a portion of the settlement, to ensure their education is provided for without affecting their own financial aid eligibility.
The key is to be deliberate. A legal victory is a powerful event, but it is the planning that follows which determines whether that victory translates into lasting security or a fleeting financial gain. It is the difference between an award and a legacy.
If you or a family member are anticipating a significant legal settlement, the first step is to understand its long-term implications. Before the funds arrive, we can schedule a confidential review to map out how a structured settlement or trust can protect both the award and your eligibility for essential benefits.
