In a minor settlement situation, plaintiff attorneys will often first think about using a structured settlement annuity as the settlement planning vehicle for the minor.
Annuities for minors can be a great solution. The annuities are backed by the largest life insurance companies in the world, the payment amounts and dates are fixed, and judges will almost always approve the use of a structured settlement annuity in cases involving minors. However, there is another more flexible and liquid option available in minor’s cases — a settlement trust.
For example, in a catastrophic injured minor's case, while an annuity can work, there are other factors that need to be taken into consideration. Where future medical expenses are uncertain, it is important to consider the need to have some flexibility and liquidity that an annuity cannot offer — but that a settlement trust can provide. A settlement trust can allow for distributions to the beneficiary to handle unexpected and unanticipated medical needs — where an annuity would only be able to pay out on the dates and in the amounts chosen when the annuity was established.
One way to benefit from the guarantees of an annuity and the flexibility of a settlement trust is to use both planning tools. A structured settlement annuity can pay into a settlement trust. Having the annuity funds deposited into the trust allows the trustee some flexibility to pay for the needs of the minor between the date of settlement and when the minor reaches the age of majority.
So, again, one major advantage of using a settlement trust (either alone or in conjunction with a structured settlement annuity) can be a better option than solely using a structured settlement annuity.
In other situations, preserving government benefits of the minor may be an important consideration. In these situations, establishing a settlement trust (either with a special needs trust trigger or set up as a special needs trust) will allow for government benefits to be protected in the future for that minor.
In situations involving a birth injury case or similar types of cases, the medical issues of the minor may persist indefinitely, and the minor will likely need government benefits like Medicaid and SSI. Having a trust established that allows for that minor to qualify for Medicaid and SSI will work to his/her benefit and will give that client as many options as possible.
So, the next time you have a case for a minor, give us a call. We can help you explore whether an annuity, a settlement trust, or a combination of both may make sense for the client. In many instances, the flexibility and liquidity that a settlement trust offers can make it a great solution in minor’s cases.
Amicus provides expert guidance on structured settlements and government benefits planning, helping you protect your client's financial futures with confidence.
