A construction worker from Brooklyn falls from a scaffold. After two years of litigation, his family receives a multi-million-dollar settlement. The relief is immense—medical bills can be paid, and his family’s future seems secure. But then, a new kind of pressure begins. The phone rings constantly with requests for money and can’t-miss investment schemes. The settlement, meant to be a lifeline, suddenly feels like a liability.
I have seen this scenario play out many times. Winning a personal injury lawsuit is only half the battle. The other half is protecting the award from mismanagement, creditors, and unintended consequences. A large, unstructured settlement can jeopardize eligibility for essential government benefits and evaporate far more quickly than anyone imagined. True victory isn’t just about the dollar amount—it’s about establishing prudent stewardship over those funds for the long term.
A Settlement Is More Than Just Money
A personal injury award becomes a personal asset the moment it is paid. This creates immediate and significant legal and financial consequences. For a family dealing with a life-altering injury, the influx of cash can create problems they are unprepared to handle. The most common challenge we see is the loss of needs-based government assistance.
Programs like Medicaid and Supplemental Security Income (SSI) have strict asset limits. A person receiving a seven-figure settlement will almost certainly be disqualified from these benefits. This means the settlement funds—intended for future care, lost wages, and quality of life—must first be spent down on medical costs that would have otherwise been covered. It’s a devastating financial trap.
Without a formal structure in place, the funds are also exposed. They can be reached by future creditors or lost through poor financial decisions. The responsibility of managing a large sum of money, especially while recovering from an injury, can be an overwhelming burden.
The Supplemental Needs Trust as a Shield
For many of our clients in New York, the most effective tool for protecting a personal injury award is a Supplemental Needs Trust, or SNT. This is a specific type of irrevocable trust designed to hold assets for a beneficiary with a disability without disqualifying them from receiving government benefits.
The settlement funds are paid directly into the SNT instead of to the individual. A trustee—a person or institution chosen for their financial judgment—is appointed to manage the funds. The trustee has a fiduciary duty to act in the best interest of the beneficiary. They can use the trust assets to pay for a wide range of expenses that enhance the beneficiary’s quality of life, such as:
- Accessible housing and vehicle modifications
- In-home care and specialized therapies
- Education and vocational training
- Recreation and travel
Because the beneficiary does not legally own or control the assets in the trust, the funds are not counted for SSI or Medicaid eligibility. This allows the settlement to serve its intended purpose: to supplement, not replace, the essential benefits the individual relies on. The creation and administration of these trusts are governed by New York’s Estates, Powers and Trusts Law (EPTL) § 7-1.12, which provides the statutory framework for their use.
Contingency Planning for the Unthinkable
Sometimes, the injured party does not survive to see their case resolved. If a plaintiff in a personal injury lawsuit passes away before a settlement is reached, the legal claim does not disappear. It becomes an asset of their estate.
The right to continue the lawsuit passes to the estate’s personal representative, who is appointed by the Surrogate’s Court. If the deceased had a will, this person is the executor they named. If they died intestate—without a will—the court appoints an administrator. The executor or administrator steps into the shoes of the deceased to continue the litigation on behalf of the estate’s beneficiaries.
This is why a valid will is not just prudent—it is essential. A will allows you to choose a capable executor to manage this complex process. Without one, you leave that decision to the court, which can lead to delays and disputes among family members at an already difficult time.
A settlement received by an estate is then distributed according to the terms of the will or, if there is no will, the state’s intestacy laws. Proper estate planning ensures that if the worst happens, the proceeds of your legal claim will go to the people you intend, managed by a person you trust.
A personal injury award can represent a chance at a new beginning. But it requires a deliberate plan to ensure it serves your family for generations. If you anticipate receiving a settlement, the first conversation should be about creating the legal structure to receive it. Schedule a consultation with our firm to discuss the specific trust instruments appropriate for your family’s situation.
