If your client’s personal injury lawsuit is coming to an end and settlement is on the horizon, establishing a concrete plan for his or her financial recovery is a critical next step. Each plaintiff’s individual needs will differ, and there are many strategies to explore. That’s why many lawyers and their clients work with an experienced, comprehensive settlement planner to come up with a customized approach. No matter the plan, the goal is the same: to meet the client’s needs now and as far into the future as possible.
For many, establishing a trust with settlement proceeds is a helpful component to a durable settlement plan. One lesser discussed type of trust is the discretionary support trust. There are specific scenarios that benefit from this choice and some critical things to know.
When talking about a beneficiary’s right to spend money 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. These decisions are up to the discretion of the trustee. In other words, the trustee can have absolute management control over the trust.
Why would you want that option for your client? 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 and Medicaid. In those situations, the trustee is not focusing solely on distributing payments for “non-covered” expenses to maintain eligibility for benefits, so there is more wiggle room in what he or she can purchase with the money in the trust.
Even though the trustee will have more power over the distributions, a settlement planner can identify in the agreement 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. The terms can be customized for each beneficiary to ensure the best quality of life possible.
Plaintiffs and their attorneys benefit from speaking with an experienced settlement planner who is well-versed in establishing the right kind of trust for each individual. If your client is approaching settlement, I welcome you to contact my firm, Milestone Consulting. Our team can help you and your client make important financial decisions for the future.
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).