How to Turn a Personal Injury Settlement into a Trust Fund
I hope that you are never in a position for this post to be of use to you. It’s far better you not endure the personal injury and never receive a settlement award. However, if you or a loved one are ever in this position, here are a few things you should consider after you’ve decided to place the settlement in trust.
Placing the settlement in trust can be useful for qualifying the injured party for government aid. If the family trust is set up properly, the injured party could be made eligible for government aid and still have access to the settlement money for things that the government won’t cover. This would effectively cause the settlement proceeds to last much longer than otherwise possible. But you must begin with this goal in mind when creating the trust, because it may be difficult or impossible to change later on.
If the injured party is not already disabled, a trust can provide superior disability protection by allowing the Trustee to provide for the injured party’s needs without the need for court intervention, depending on your jurisdiction and the mechanism used to create the trust.
It’s been reported that the death rate is 1 for 1, so everyone is going to make it. If the injured party is still alive, they will not always be, and thought needs to be given during the creation of the trust as to who should be the successor beneficiaries of the settlement award. Doing this work in advance of death will save the family much work, time, and expense when the injured party eventually passes on.
How to Turn a Personal Injury Settlement into a Trust Fund | Legal Settlement
Depending on the value of the settlement award, estate taxes may also be an issue. If that is a possibility for you, then multiple trusts (such as an Irrevocable Special Needs Trust in addition to an Irrevocable Life Insurance Trust) may be appropriate to prepare for that large tax bill when the injured party eventually passes away.
The mechanics of trust creation to receive a personal injury settlement will depend upon your jurisdiction, as well as the competency of the injured party (if still alive), and the source and manner of payment of the settlement proceeds. For example, if the proceeds are received by way of a settlement of a suit that has been filed in the Courts and the injured party is alive, but not competent, you may be required to file an action in the probate court to establish the trust to receive the settlement proceeds. However, if the injured party is competent and the proceeds are received prior to filing a lawsuit, then it is possible to create a trust to receive the proceeds without any court involvement at all.
Contact our experienced Arizona Estate Planning Attorneys at (480)947-4339.
The manner of creating your trust and the type and number of trusts you will use will depend on your goals and your particular situation (competency, size of award, etc.) But regardless of these variables, your first step in creating a trust to receive personal injury settlement proceeds should be to consult with an estate planning attorney Kansas City relies on who concentrates in a trust created to help you navigate the many options available to you.
Thanks to our friends and contributors from Legacy Planning Advocates for their insight into trusts and estate planning.
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