A family in Brooklyn gets the call they’ve been waiting for. After months of litigation following a construction site accident, a settlement has been reached. The amount is significant—enough to cover medical bills, lost wages, and future care. There is a profound sense of relief. But winning the lawsuit was only the first battle. The second, more critical step, is protecting that money for the long term.
I have seen the aftermath of these cases for decades. A large, lump-sum payment feels like a permanent fix, but it is a fragile one. Without the right legal structures, these funds are exposed to future creditors, to division in a divorce, and to claims from Medicaid seeking reimbursement. The settlement meant to provide a lifetime of security can evaporate in just a few years.
The goal is not just to win a case, but to convert that victory into lasting stability. This requires thinking less like a litigant and more like a steward of your family’s future.
The Settlement as a New Family Asset
A personal injury award is not a lottery win. It is a recovery intended to compensate for tangible and intangible losses—to make an injured person whole again, as much as money can. When my firm advises families in this situation, we begin by reframing the settlement. It is not just cash; it is a critical asset that must be integrated into your estate plan.
The most immediate threat is often the loss of eligibility for means-tested government benefits like Medicaid and Supplemental Security Income (SSI). These programs have strict asset and income limits. A settlement paid directly to an individual will almost certainly disqualify them from the very benefits they need for ongoing care. The settlement money is then spent down on medical costs until the person is once again poor enough to qualify. This is a tragic and avoidable outcome.
Using Trusts to Safeguard Your Recovery
The primary vehicle we use to protect settlement proceeds is a trust—specifically, a Supplemental Needs Trust (SNT). An SNT is a legal instrument designed to hold funds for a beneficiary with a disability without compromising their eligibility for public benefits.
Here is how it works:
- The settlement funds are paid directly into the trust, not to the individual.
- A trustee you choose manages the funds with a strict fiduciary duty to act in the beneficiary’s best interest.
- The assets in the trust are not legally “owned” by the beneficiary, so they do not count against the asset limits for programs like Medicaid.
- The trustee can use the funds for expenses that enhance the beneficiary’s quality of life—things government benefits do not cover. This includes specialized medical equipment, home modifications, therapy, education, and transportation.
New York law explicitly authorizes these trusts. Under EPTL § 7-1.12, a properly drafted Supplemental Needs Trust allows a person with severe and chronic disabilities to receive financial support from the trust while maintaining government benefits. It is the single most important tool for ensuring a personal injury award serves its intended purpose for a lifetime.
When a Wrongful Death Claim Becomes an Estate Asset
In the most tragic cases, an injury is fatal. A wrongful death lawsuit may follow, but the person who was harmed is no longer there to receive the recovery. In this situation, the proceeds from the lawsuit become an asset of the deceased’s estate.
How those funds are distributed depends entirely on whether an estate plan was in place. With a will, the funds are distributed according to its terms. Without a will, the assets pass according to New York’s intestacy laws, which dictate a rigid formula for which relatives inherit. The funds may go to a spouse, children, or even distant relatives—people the decedent may not have intended to benefit.
A foundational estate plan is critical, even for the young and healthy. A will ensures that you—not a statute written in Albany—decide where your assets go. A wrongful death settlement can be substantial, and having a will in place ensures those funds are directed with intention.
The work of securing a settlement is difficult. The work of protecting it is a matter of deliberate planning. The lawsuit addresses the past; a well-structured trust and estate plan secure the future.
If your family is anticipating a settlement from a personal injury or wrongful death claim, the prudent next step is to model how those funds will interact with your existing assets and potential government benefits. Schedule a confidential planning session with our firm to review the structure of the settlement before it is finalized.
