Creating a Trust for Personal Injury Settlement

Creating a Trust for Personal Injury Settlement

Victims of a personal injury have many burdens to bear.  Most people can expect to deal with the stress of a lawsuit, loss of income, coping with injuries and physical therapy.  However, one item that many people are not prepared to deal is a sudden influx of money from a settlement or trial verdict that good personal injury attorney will help them receive.

For some, they are just not used to handling large sums of money, and a traditional trust can be created so that the recipient of the money can handle it jointly with a trusted family member or potentially a corporate trustee.

For individuals who are disabled to the point where they will qualify for SSI and Medicaid, receipt of a large personal injury award will jeopardize a person’s ability to qualify for government benefits unless that money is placed into a special needs trust. This type of trust is typically known as a First Party Special Needs Trust, a Self Settled Special Needs Trust or a (d)(4)(A) Trust.

Administration of Special Needs Trusts can be very complex because those trusts are limited in what they can pay for by statute. Special Needs Trusts can generally not pay for food, shelter, electricity, gas or water and it may not pay for anything that can be converted into food, shelter, electricity, gas or water. Additionally, cash should almost never be distributed to a beneficiary from the trust and there are special rules about a trust owning a home.

One very important rule about Special Needs Trusts is that the beneficiary of the trust, the victim of the personal injury, can never ever act as Trustee.  This means that just as you are receiving the money, you need to give up all control of it.  This is not an easy thing to do psychologically, especially if you know that the trust is going to be limited in what it can pay for.

The goal at this point is to find somebody that you can truly trust to manage the money and look after the your best interests,  If you do not know of anyone, a good attorney should be able to help you find a corporate trustee or independent trustee that can be counted on.