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John Bair
John Bair
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Settlement Planning: Getting Started


Your son or daughter’s spinal cord injury case is headed to mediation, your lawyers have been working overtime preparing for it, and inside you may feel scared to death. Everything is unfamiliar. You agree with your lawyer, that the mediation is an opportunity to see if the case can be resolved, and it would eliminate the risks at trial. Everything is on the line. This series of posts are intended to identify some good practices to prepare for the transition from litigation to life.

It’s understandable for a person to feel overwhelmed when they’re expecting to receive a settlement from a lawsuit involving catastrophic injury or for the death of a loved one. What do you do with the money? What responsibility comes with it? How to invest it? Should you put it in the bank? What about government benefits – will they be affected or discontinued?

settlement plannerSettlement recipients are faced with these and other important questions about their future. For many, working with an experienced settlement planner is the first step toward making informed decisions.

Settlement planning takes a holistic look at a plaintiff’s individual situation, their lifestyle, finances and other factors. Based on this understanding, a settlement planner will help develop a plan for the incoming settlement; strategies may include a combination of wealth management, long term risk analysis, future healthcare costs and the protection available under certain trusts. Combining these methods will help the plaintiff meet his or her immediate needs while preserving a portion of the wealth to take care of future needs.

Asset Protection Trusts

When clients receive a lifetime of income and assets that are intended to pay for their future medical for the rest of their life, the two principal risks to the family are dissipation and catastrophic loss. These trusts can be designed so protect against both of these core lifetime planning risks.

A Domestic Asset Protection Trust (DAPT) is an irrevocable trust established under the laws of a state who laws absolutely favor trust beneficiaries, not creditors. Nevada, South Dakota and Delaware are good jurisdiction choices.

Protecting the assets from catastrophic loss is like buying an insurance policy for your home. If the settlement is intended to protect for a lifetime, insuring it is prudent. DAPT will protect against all judgements and creditors, bankruptcy, divorce, business failure, and liability from accidents.

The rules of the road for these trusts are: the transfer needs to be qualified, you must use a professional trustee in the jurisdiction, the trust must be irrevocable, and the trustee should have discretion over distribution. With the right plan and trustee, this framework can work masterfully for a parent of a disabled child, or a spouse caring for a loved one.

Partnering and Hiring Your Family CEO

The trustee should be viewed as the family CEO. Professional trustees can be removed or replaced easily so long as the key family members have “Trust Protector” status in the agreement. The dynamic of having the say and control over the entire trust is akin to owning a business, but letting someone else manage the day-to-day. This partnering concept is so valuable to moms and dads who are working, being caregivers, raising healthy children, while also managing the day to day of a child with cerebral palsy, or a brain or spinal cord injury.

As settlement planners, families need to embrace early in the legal and financial planning process that they want to do business with people who are experienced and understand these cumulative challenges. Being able to trust the plan, and to take the necessary steps from litigation, to settlement, to implementation of a life plan are major milestones. Working with an expert who you and your lawyer trust may be the only way for you to get it right the first time.

What about Government Benefits?

A settlement planner will also consider a person’s eligibility for government benefits, because it’s important to maintain eligibility for these important programs if applicable. Many government programs that provide disabled individuals with monthly income, payments for medical services and/or needs-based benefits have strict financial eligibility limits. Careful planning is required to ensure a beneficiary does not lose eligibility for these programs.

Certain settlement options are available to preserve a person’s eligibility status. A special needs trust, for example, enables a disabled individual to receive the proceeds of a settlement while maintaining government benefits eligibility. For Medicare beneficiaries about to receive a settlement in a workers’ compensation or liability case, a Medicare set-aside (MSA) designates a portion of the settlement proceeds to pay for future injury- or illness-related medical expenses that would otherwise be payable by Medicare.

Planning Your Future with a Settlement

A settlement planner will act in a person and his or her family’s best interest from mediation throughout the life of the settlement plan. It’s never too early to get started. For more information about settlement planning, check out Milestone Consulting’s settlement guide for plaintiffs.

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