A construction worker falls from a scaffold in Brooklyn. After two years of litigation, his personal injury attorney secures a seven-figure settlement. His family believes their financial worries are over. In my experience, this is often when their most significant financial challenges actually begin.
A settlement isn’t a lottery win. It is a calculated sum meant to replace what was taken from you—your ability to earn a living, your health, your freedom from pain. It is a fund that may have to last for the rest of your life. The moment that money hits your bank account, it becomes vulnerable. Vulnerable to creditors, to claims from a future divorce, to poor financial advice, and even to the government benefits system itself. The work of a personal injury lawyer is to get you that award. Our work is to make sure it lasts.
Thinking about this isn’t just prudent; it’s an act of stewardship over your own future.
The Government Benefits Trap
For many injured clients, the most immediate and devastating threat to their settlement is the loss of essential, needs-based government benefits. Programs like Medicaid and Supplemental Security Income (SSI) have strict asset and income limits. A multi-million-dollar check is, by definition, far over those limits.
I have seen cases where an individual receives a settlement and is immediately ruled ineligible for the very Medicaid coverage they rely on for their ongoing, post-accident medical care. They are then forced to pay for their extensive treatments out-of-pocket, spending down their settlement at an alarming rate until their assets are low enough to re-qualify. It’s a vicious cycle that can decimate an award meant to provide a lifetime of security.
This is not an unsolvable problem. It is, however, a problem that requires a deliberate plan. New York law provides a specific contingency for this. Under Estates, Powers and Trusts Law (EPTL) § 7-1.12, we can establish what is known as a Supplemental Needs Trust (SNT). This is a specialized irrevocable trust designed to hold the settlement proceeds for the benefit of the injured person.
Because the funds are in the trust—and not legally in the individual’s name—they are not counted as an available resource when determining eligibility for programs like Medicaid. The trustee, who has a strict fiduciary duty to act in the beneficiary’s best interest, can then use the trust funds to pay for expenses that government benefits do not cover. This includes home modifications, specialized therapies, accessible transportation, and other costs that improve the person’s quality of life. The settlement becomes a supplement to public benefits, not a replacement for them.
Beyond the Immediate: Building a Generational Plan
Protecting eligibility for benefits is the first priority, but true stewardship of an award looks further down the road. A large sum of money can create pressures that a family has never before experienced. It can attract opportunists and strain relationships. Creating a formal structure for the funds is not about mistrust; it’s about creating clarity and removing the potential for conflict.
A well-designed trust does more than just hold the money. It puts a professional framework around it. We work with clients to select a trustee—this could be a trusted family member, a professional fiduciary like a bank’s trust department, or a combination of both. The trustee is legally obligated to manage, invest, and distribute the funds prudently and according to the terms we set out in the trust document. This protects the beneficiary from making impulsive decisions or being subjected to undue influence.
This structure also provides a degree of asset protection from future unknown creditors. If the beneficiary is sued years later for an unrelated matter, the funds held within a properly structured irrevocable trust are generally shielded from that judgment.
The Final Chapter: A Legacy from Tragedy
We must also consider what happens to the funds that remain after the beneficiary’s life. Without a plan, any money left over will be subject to probate in Surrogate’s Court. The court will oversee the distribution according to the person’s will, or if there is no will, according to state intestacy laws. This process can be slow and public.
The trust, however, can provide a seamless transition. The trust document itself can name successor beneficiaries. It can specify exactly who should receive the remaining funds and how they should receive them—either outright or held in further trust. A tragedy that resulted in a settlement can be transformed into a legacy of support for children or grandchildren, funding their education or helping them buy a first home. It is the final step in turning a recovery into a permanent family asset.
Winning a personal injury case is a monumental achievement. But the work isn’t finished when the check is cut. Ensuring that award provides the security and support it was intended to—for a lifetime and even beyond—requires a different kind of advocate.
If you or a loved one is in the process of resolving a personal injury claim, the time to plan for the settlement is before it arrives. You can schedule a confidential consultation with our firm to review the implications and design a structure to protect the award.
