Factors to Consider Before Disbursing Settlement Proceeds to a Client

Obtaining a settlement for your client is a victory; however, if that client is the recipient of government benefits, the risk of losing those benefits is a real possibility. Personal injury attorneys must ensure that their clients are aware of settlement options that are designed to preserve their settlement award while protecting their benefit eligibility. These options include special needs trusts, which includes the pooled trust for Medicaid, and structured settlements. This article will discuss considerations that should be made before choosing a lump sum payment and give an overview of several settlement options for your client.

What to Consider Before Choosing a Lump Sum Payment

A lump sum settlement may make sense in some cases, but as your client’s counsel, you must ensure that they consider factors such as:

  • Government benefit eligibility: Accepting a cash lump sum may increase your client’s asset level, thereby placing them over the qualification threshold for benefits. This will disqualify them from receiving benefits.
  • Tax liability: The IRS doesn’t tax most personal injury settlements. There are exceptions which could make part of your settlement taxable.
  • Long-term money management: Preserving settlement funds takes strategic planning. Your client will need a financial advisor who will ensure that their future needs are considered.
  • Lifetime care costs: If your client has a disability that requires long-term care, the associated cost of care can be enormous when factoring in doctor visits, medication, transportation, and more.

Settlement Protection Options That Meet Your Client’s Needs

There is no one-size-fits-all solution when it comes to settlement planning. Attorneys must provide their clients with the best option for their unique circumstances. This includes considering factors like your client’s age, future medical needs, anticipated financial needs, and current assets. If your client has become disabled due to injury, certain types of special needs trust options are available. There are three types: first-party trust, third-party trust, and pooled trust. A first-party special needs trust holds assets (the settlement proceeds) that belong to the beneficiary. Third-party special needs trusts are funded by relatives of the beneficiary. A pooled trust is established by a nonprofit organization and holds funds from many different beneficiaries with special needs.

A structured settlement is an agreement between the injury victim and the defendant for future periodic payments that are compensated through the use of annuities. Structured settlements are a preferable alternative to a lump sum payment for personal injury settlements.

All of these options provide a safe place for your client’s settlement funds without jeopardizing their eligibility for government benefits. Before settling your case, contact Synergy Settlement Solutions to ensure your client’s financial future.

For more information, or to schedule a consultation, please submit our contact request form.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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