Personal Injury Settlements and Special Needs Trusts
May 8, 2023
For individuals with special needs, receiving a lump-sum payment—be it an inheritance or personal injury settlement—may affect the person’s eligibility for public benefits such as SSI and Medicaid. However, the financial compensation from an injury claim may provide additional income to cover expenses that are not covered by disability benefits. Thankfully, a special needs trust can help preserve the person’s personal injury settlement and eligibility for public benefits.
At The Law Offices of Bruce Peotter, we’re committed to offering knowledgeable and comprehensive guidance to clients in the legal matters of estate planning and special needs trusts. Our Colorado estate planning attorney is available to discuss your unique situation and enlighten you about your options to preserve your disabled loved one’s benefits and financial future. We’re proud to serve clients across Englewood, Colorado, and Tustin, California.
What Is a Special Needs Trust?
A special needs trust can be described as a fiduciary arrangement that makes it possible for a disabled, critically ill, or incapacitated person to receive extra income while qualifying for public assistance and other disability benefits.
Essentially, a special needs trust allows parents to keep away property and money for their children with special needs and still ensure that they receive disability benefits provided by Social Security, Supplemental Security Income (SSI), Medicaid, Medicare, and other public benefits.
How Can It Relate to a Personal Injury Settlement?
Upon filing a successful claim, you may be awarded an injury settlement (financial compensation) to cover your injuries and damages. However, receiving a lump-sum payment might affect a disabled beneficiary’s eligibility for SSI. Hence, to help protect your personal injury settlements and SSI benefits, consider setting up a Special Needs Trust (SNT).
Once created, all lump-sum payments received would be transferred into the special needs trust. This will serve as additional funds to cover expenses and needs that are not covered by the SSI benefits. Examples include therapy, legal services, and nursing home care. Above all, the disabled beneficiary will still be able to maintain their eligibility for SSI. A knowledgeable attorney can enlighten you about the various types of special needs trusts and guide you through the process involved in creating the trust.
Types of Special Needs Trusts
First-Party Special Needs Trusts
A first-party special needs trust is a “self-settled” trust. This may be used when the disabled beneficiary inherits property, funds, and assets or receives a court settlement. An individual with no previous disability but later becomes disabled may create a first-party special needs trust.
Third-Party Special Needs Trusts
A third-party special needs trust can be set up by someone making adequate plans in advance for a disabled child or loved one with special needs. The parent, siblings, or grandparent of the disabled child may create the third-party special needs trust.
Which One Is The Best Option For Personal Injury Inheritance?
A first-party special needs trust is typically the ideal option for personal injury inheritance. The trust is usually funded from inheritance directly received by the disabled beneficiary or a personal injury settlement. It is vital that you reach out to an experienced attorney for help with your unique case.
The Benefits of a Special Needs Trust
Here are some benefits of a special needs trust:
It helps enhance the disabled beneficiary’s quality of life by maximizing their available resources.
It protects property and assets from creditors or property distribution in a divorce.
It allows you to preserve assets and money to support the disabled person’s needs.
It preserves the disabled beneficiary’s eligibility for Medicaid and Supplementary Security Income.
It preserves the disabled beneficiary’s government aid.
It allows you to choose a successor trustee who will help manage trust assets, finances, and other investments.
It helps provide extra funds for the disabled beneficiary’s other needs not covered by public disability benefits.
A skilled Colorado special needs trust attorney can explore your options with you and help create and fund the special needs trust.
Get All the Information You Need
Establishing a special needs trust can be a great way to leave assets behind for a child who is disabled, protect their personal injury settlements and financial future, and preserve eligibility for public assistance. However, there are a lot of complex procedures involved in creating a special needs trust. Consulting with an experienced estate planning attorney is crucial.
At The Law Offices of Bruce Peotter, we are ready to guide clients through the complexities involved in creating special needs trusts. As your legal counsel, our attorney can enlighten you about your available legal options and determine the right option for your disabled loved one’s needs. In addition, we will help set up the special needs trust and outline a strategic plan to preserve their personal injury settlements, assets, and ability to receive government benefits.
Contact us at The Law Offices of Bruce Peotter today to schedule an initial consultation. Our team is proud to serve clients across Englewood and communities in and around Denver, as well as throughout Orange County, California, including Irvine, Costa Mesa, and Santa Ana.