Can a Structured Settlement Help My Special Needs Planning?

Structured settlements are a perfect addition to the funding of your Supplemental Needs Trust or Special Needs Trust. If structured properly, they can provide stable income over time, along with tax benefits and guarantees without harming eligibility for needs-based programs such as Medicaid. Continue reading for a discussion of how a structured settlement can support your special needs plan, and contact a seasoned West Palm Beach special needs planning and elder law attorney for assistance.

What is a structured settlement?

A structured settlement is a form of long-term, periodic annuity, typically created to deal with the damages recovered as a part of a lawsuit settlement. For example, if you were injured in a car accident by a negligent driver, and the at-fault driver chose to settle rather than fight your case through trial, you may decide to enter into a structured settlement annuity rather than take the settlement payments as cash. The settlement payments will be used to purchase an annuity from a life insurance company, and the parties will set terms for payments. The life insurance company will pay the plaintiff over time via a series of payments according to the terms. Once the terms of the annuity are set, they cannot be changed.

How structured settlements can benefit your special needs planning

Structured settlements are annuities that receive special tax treatment under the Internal Revenue Code. If the entire settlement is paid into the annuity, the payments are tax-free. Moreover, structured settlement income does not affect eligibility for Medicaid, Social Security Disability benefits, or other forms of need-based aid.

Structured settlements are also tools designed to ensure that the settlement proceeds are not rapidly dissipated. If you suffered a permanent injury as a result of the accident or were already disabled, it is important to not blow through the funds too quickly lest you end up without sufficient funds to pay for long-term care.

Structured settlement annuities also provide a conservative fixed income strategy, and an established insurance company typically manages the funds. The payments are set and are not dependent on external market factors.

Drawbacks to structured settlements

Structured settlements are, by their nature, inflexible. You get period payments over time even though it is money to which you are technically already entitled. People with special needs may suddenly find themselves with heavy lump-sum medical bills that exceed the scheduled payments and no other income to help cover costs. If you find yourself disabled after an injury, it is very helpful to have a dedicated special needs planning attorney sit down with your plaintiff’s attorney and the structured settlement broker to determine how best to proceed in light of your specific circumstances. It may be advisable, for example, to put only a portion of the settlement into the structure and retain other parts of the settlement in cash or other liquid investments.

Planning for Need-Based Eligibility

A skilled West Palm Beach special needs planning attorney can help you and your family plan appropriately to maximize your chances for need-based eligibility. If you need an experienced and compassionate Florida special needs planning and elder law attorney, contact the seasoned, dedicated, and effective West Palm Beach trust and estates attorneys Shalloway & Shalloway at 561-686-6200.