Introduction
It’s common for plaintiff attorneys to consider settlement planning needs for their clients. There may be a need to set up a special needs trust to protect their government benefits or establish a structured settlement annuity to stretch out the client’s recovery or reduce taxes. But more often than not, estate planning implications are overlooked when doing settlement planning for a client.
For example, in a minor settlement case where the client is receiving government benefits, a special needs trust is established for the settlement plan. The client’s government benefits are unaffected when he/she receives the settlement funds. While this is perfectly acceptable, it might be even more helpful to plan ahead with estate planning.
Since the child is on Medicaid, SSI, or other needs-based benefits, when the parents pass away and leave funds directly to their child’s name, they are potentially jeopardizing their client's eligibility to continue to receive those benefits.
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It’s important in these situations to discuss estate planning considerations with the family to make sure that leaving funds to the child will not jeopardize his/her government benefits. Other family members who would like to leave funds can do so as well without affecting government benefits through a third-party special needs trust.
Estate planning can also be useful in typical settlement planning that doesn’t involve a special needs trust. It's important that the client has an estate plan, a basic will, a basic power of attorney, and a basic healthcare directive. If it's a large settlement, it’s worth considering whether umbrella liability coverage should be considered.
Since the client will receive a substantial amount from the settlement, it’s important to plan ahead and protect the family’s money and assets from creditors, predators, and other sources.
In addition to settlement proceeds planning, taking a more holistic approach by looking at their estate plans, insurance, and insurance coverage from an estate planning perspective ensures that the family’s assets are protected in the future.
If you have a client who would benefit from estate planning, give us a call. With expertise in government benefits planning, we can help them create an estate plan that ensures the family’s needs and goals are met.
