The settlement process will involve many people, many decisions, and you will need to educate yourself quickly to make sure you decide on a suitable financial plan.
There may be settlement meetings or mediations where everyone else involved will have considerable experience in these matters. Settlement time will cause agreements to be signed and will often require subsequent court approval. These settlement documents are critical to your financial planning process. Talk to your attorney about contacting us at the time of settlement.
We will work with you and your attorney to be sure that you understand your options and can make choices knowing it meets your interests, rather than anyone else’s.
What Makes Us Different Than a Financial Planner?
Financial planning helps you create a plan to best allocate your money and future earnings for what may happen over the years. The difference with a settlement is that you should have a good idea of the amount of money you are about to receive, allowing you to make more concrete decisions. The groundwork for your new financial future could be set forth in the settlement documents. We have an intimate knowledge of this merging of financial plans and legal documents. Our specialized expertise in this area is what differentiates us from the normal financial planner world.
Your settlement may also draw the unwanted attention of third parties ( Read more here » ). Our only interest is to partner with you to help you make responsible choices.
First determine the necessary amount needed for immediate reasonable expenditures.
Settlement dollars are directed to an “irrevocable” trust, possibly in the settlement documents. These trusts can be designed to protect this money from creditors in the future and most importantly spend money wisely on your future needs. Irrevocable trusts are permanent. You cannot change your mind later. They are an excellent tool for control but they do incur ongoing expenses to operate. These trusts are available from many institutional trust companies and we know the active companies in our area with whom you can meet and get to know your trustee.
Special Needs Trusts
Another type of irrevocable trust specifically designed for injured people under the age of 65 and dependent on public assistance. The only way to “shelter” your settlement and continue eligibility for future public assistance is with a correctly crafted special needs trust and settlement. There are attorneys well known to us in our multi-state area who can draft these trusts and possibly provide advice for your family on Welfare and Medicaid matters regarding the settlement. The attorney costs may be charged to the trust once it has been established.
Structured Settlement Annuity
An annuity is a life insurance company contract to pay you periodic payments in the future. This is your safe harbor source of money that can be designed to make regular payments to you or your trust to meet specific needs. Their additional benefit is they can also pay you as long as you are alive. This lifetime annuity is a rare product in its ability to pay for your lifetime even if you live into your 90’s or 100’s. The purchase amount for the annuity comes directly from the settling defendant and when written correctly in the settlement documents, all future payments will be income tax free. Some of the payments can be designated to be guaranteed, meaning you can leave them to your beneficiary if you are not living when they come due. There are no ongoing expenses associated with this annuity. A commission is paid to the settlement planner involved in its origination.
Medicare Set Aside Accounts
Medicare rules apply to any personal injury settlement that include damages for future medical expenses. Medicare has issued specific guidance for workers compensation “future” medical settlements and settlement dollars can be “set aside” in a separate account to pay for future Medicare eligible expenses. Structured settlement annuities are used to fund substantially all of these accounts because of lifetime payment issues and the annuity almost always saves money versus allocating all cash from the settlement. Personal injury settlements that included a future medical damage component have generally adopted Medicare workers compensation procedures but this area is evolving and we will always stay abreast of developments and solutions.
The single item that injured people are totally surprised to learn is part of their settlement has to go toward paying medical providers who rendered care for the injury. This is called a “lien” against the settlement. The lien normally is pursued by: the health insurance company who paid the medical providers or the actual medical providers if there was no insurance, the workers compensation carrier, Medicare or Medicaid. The lien laws are different in each state but plan on there being no free ride for these expenses. Some of these liens have to be paid FIRST before anyone else receives money and some have to be reimbursed at 100% of the paid amounts while some can be negotiated for less. Medical liens involving a person who subsequently died from their injury may follow a different set of rules. The Medicare process to determine the amount owed them can take up to 6 months after the settlement. As such, this lien issue is the single hindrance to accurate and best settlement planning. We are very familiar with the lien process but the resolution of these matters should normally be left to attorneys.