A construction worker from Queens receives a seven-figure settlement after a fall on the job. The money is life-changing, intended to cover a lifetime of medical care and lost wages. His family is overjoyed. But within three years, the funds are gone—drained by a combination of well-meaning but poor advice, sudden family pressures, and a lack of any formal structure to protect the award. In my practice, I have seen this story play out too many times. The end of a lawsuit is not the end of the story; it is the beginning of a new and profound responsibility.
A settlement is not a lottery win. It is a recovery—a sum meant to compensate for a permanent loss of health, ability, or even a life in the case of a wrongful death claim. The money carries with it a heavy obligation to make it last. Stewardship. That is the word we come back to. How do you act as a good steward of a resource that must support you or your family for decades to come?
The Settlement Arrives: A Windfall with Risks
The moment a significant settlement is confirmed, a new set of challenges begins. The award can feel like an abstract number until it arrives in a bank account, when it becomes very real, and very vulnerable. The primary risks we see are both external and internal.
Externally, the funds can be exposed to future creditors, opportunistic claims, or unwise business ventures presented by others. Internally, there is the challenge of managing a large sum of money when you have never had to before. This is not a moral failing; it is a simple lack of experience. Financial markets are complex, and the emotional weight of managing a life-sustaining fund can be immense.
Furthermore, a large cash settlement can immediately disqualify an individual from essential means-tested government benefits, such as Medicaid and Supplemental Security Income (SSI). For a person with long-term medical needs, losing Medicaid coverage can be financially catastrophic, with the settlement funds quickly depleted by the very healthcare costs they were meant to cover.
Using a Trust as Your Primary Shield
This is where deliberate planning becomes critical. The most powerful tool we have for protecting settlement proceeds is a properly structured trust. A trust is a legal entity that holds assets on behalf of a beneficiary. A person you appoint—the trustee—has a fiduciary duty to manage those assets according to the rules you establish in the trust document. This isn’t just paperwork; it’s the creation of a fortress around your family’s financial future.
For individuals receiving government benefits, a specific type of trust is essential. In New York, we often establish what is known as a Supplemental Needs Trust (SNT), governed by Estates, Powers and Trusts Law (EPTL) § 7-1.12. This type of trust is designed to hold the settlement funds in a way that allows the beneficiary to continue receiving benefits like Medicaid. The trust assets aren’t used for basic food and shelter, which benefits cover, but for other expenses that enhance the beneficiary’s quality of life—things like physical therapy, accessible transportation, education, and recreation.
The trustee manages the funds, pays the bills, and handles the investments. This removes the day-to-day burden from the injured individual or their family, placing it in the hands of a professional or a trusted family member with a legal duty to act in their best interest. It creates a prudent, long-term structure for financial stability.
Planning for Incapacity Before It’s a Crisis
A serious personal injury often brings with it the possibility of incapacity—the inability to make one’s own financial and medical decisions. If this happens and no plan is in place, the family’s only option is to petition the court for guardianship. This process, known as an Article 81 proceeding in New York, is public, expensive, and can be deeply stressful for a family already in crisis.
A judge, not the family, will decide who should be in charge of the incapacitated person’s affairs. The court maintains oversight for the person’s entire life. This cumbersome and intrusive process can be completely avoided with two foundational estate planning documents.
A Durable Power of Attorney allows you to appoint an agent to handle your financial matters if you cannot. A Health Care Proxy allows you to name an agent to make medical decisions on your behalf. By executing these documents when you are well, you ensure your chosen representatives—not a court—are empowered to act for you. For anyone anticipating a settlement for a life-altering injury, these documents are not optional; they are a fundamental contingency plan.
The end of a personal injury case should be a moment of relief. By taking deliberate steps to protect the settlement, you can ensure it serves its intended purpose: providing long-term security and care for you and your family. The goal is to transform a financial recovery into a lasting legacy of support.
If you or a loved one is expecting a settlement, the first and most important step is to understand how those funds should be structured. We often start with a confidential review to map out how a settlement will impact your family’s specific financial and personal situation, ensuring the recovery is a blessing, not a burden.
