When an injury case is approaching settlement, coming up with a concrete plan for the proceeds is a critical next step. No matter the plan, the goal is the same: to ensure the plaintiff’s needs are and will continue to be met. As there are numerous avenues to explore, figuring out where to start can sometimes feel overwhelming.
If your loved one’s lawsuit is nearing its end, his or her lawyer might have mentioned the idea of establishing a trust with the settlement proceeds. From self-settled special needs trusts to discretionary trusts to pooled trusts, our firm has helped countless families decide on which option will ensure the highest quality life for their loved ones. It’s necessary for you to educate yourself on the different trusts out there.
I have previously written about the benefits of establishing a special needs trust, which is one excellent option for many who receive an injury settlement. For more information, check out the following posts:
- How Much Should Your Child’s Special Needs Trust Cost?
- Terms to Know When Considering a Special Needs Trust
- Choosing the Right Trustee
- What Can A Special Needs Trust Pay For?
One lesser discussed kind of trust is the discretionary support trust. There are specific scenarios that benefit from this choice and some critical things to know. Below is a breakdown of the basics about discretionary support trusts and when one might be the right choice for a disabled individual.
What is a Discretionary Support Trust?
First, it’s important to know that a beneficiary is the person who benefits from the trust. The trustee manages and oversees the trust for the beneficiary. Most families benefit greatly from selecting an independent professional trustee and a wealth manager over a bank that lumps the trust’s functions all together.
When talking about a beneficiary’s right to monetary distributions from his or her trust, trusts are typically either classified as “mandatory” or “discretionary.” If the trustee must distribute funds for the beneficiary’s specific needs, the trust is considered mandatory. On the other hand, a discretionary trust allows the trustee the choice to pay for items benefiting the disabled individual is up to the discretion of the trustee. In other words, the trustee has absolute management control over the trust.
When is a Discretionary Support Trust Helpful?
A settlement planner will establish a discretionary support trust to identify the minimal distributions a trustee must make to provide basic support to the disabled individual — while still giving the trustee broad discretionary powers over the money. That way, the trust beneficiary will be guaranteed coverage for basic needs like food, clothing, and medical care, but the trustee still maintains control. These terms can be customized for each beneficiary to ensure his or her best quality of life.
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. Individuals who receive benefits through these government programs could lose eligibility if they are simultaneously receiving support for their needs through a discretionary support trust. In these situations, a special needs trust can be established to supplement, rather than replace, a person’s government benefits by paying for non-covered services or equipment.
Getting the Right Help to Make the Most Informed Decisions
Injured individuals and their families benefit greatly from speaking with an experienced settlement planner who is well-versed in establishing trusts and complying with needs-based government benefits programs. If you or a loved one is thinking ahead to settlement, I welcome you to contact my firm, Milestone Consulting. Our team can ensure you are as well-informed as possible as you make decisions for the future.
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).