You’re nearing the end of your child’s injury lawsuit and looking toward a settlement. As a parent, the responsibility of managing this incoming money may soon weigh heavy on you. How do you ensure the settlement proceeds will last through your child’s entire life? Can your child continue to receive government benefits after the money comes in?
Many questions will likely arise when thinking about receiving the settlement, and the information available online tends to be either frustratingly unclear or altogether absent. But lots of parents have well-informed and successful plans for their disabled children. Where do parents of kids with special needs start when planning their financial futures?
Many families are advised by settlement planners to consider setting up a trust to protect their children’s assets over their lifetime. This post provides the basics about three kinds of trusts to help you educate yourself on your options and build a foundation of knowledge.
Special Needs Trust
One major concern of parents with disabled children is making a financial move that will disrupt their eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid. Thankfully, there are options that allow a person to keep receiving these needs-based benefits after obtaining a settlement.
A special needs trust supplements a person’s government benefits instead of replacing them. SSI and Medicaid are available only to people who show their income and assets are below a certain limit. To these programs, money in a special needs trust doesn’t count towards an individual’s assets or income, because that money pays for services or equipment the programs do not cover. These “non-countable” items include things like a home and furnishings, a car, the pursuit of a college degree, and life insurance policies.
Domestic Asset Protection Trust
When a settlement is intended to cover the expenses for an injured person’s lifetime, a domestic asset protection trust (DAPT) is intended to protect against judgments, creditors, bankruptcy, divorce, business failure, and liability from accidents. In short, a DAPT gives a person the opportunity for lifelong planning and protecting his or her assets — and not just assets from settlement proceeds — from catastrophic loss or dissipation over time.
Discretionary Support Trust
A discretionary support trust gives the designated trustee absolute management control over the money in the trust. At the same time, the beneficiary of the trust is still guaranteed coverage for basic needs like food, clothing, and medical care. A discretionary support trust could be the right decision for a disabled person who does not and will not receive needs-based benefits from government programs like Supplemental Security Income (SSI) and Medicaid.
Need More Information?
Parents need to be as well-informed as possible when planning their disabled child’s financial future. If you are considering setting up a trust for yourself or a loved one, the settlement planning experts at Milestone Consulting can help.
About John Bair
John Bair has guided thousands of plaintiffs through the settlement process as co-founder of Milestone Consulting, LLC, a broad-based settlement planning and management firm. Milestone’s approach is comprehensive and future-focused. John’s team has guided thousands of clients by taking the time to understand the complexities of each case. They assess the best outcome and find the path that enables each client to manage their many needs. Read more about Milestone Consulting at http://milestoneseventh.com/.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).