How will a personal injury award affect my estate plan?

How will a personal injury award affect my estate plan?
After a plaintiff in a personal injury action receives the settlement proceeds or award from a judgment, the plaintiff must consider how the proceeds will affect their estate plan. The following are considerations that should come into play whenever a plaintiff receives any proceeds as a result of injuries they suffered.

Public Aid Eligibility

Many individuals who receive proceeds from a personal injury action are receiving public aid benefits such as Supplemental Security Income (SSI) or Medicaid. Because these programs are means-tested, typically an individual who holds more than $2,000 in assets will be disqualified from these programs. In order to ensure that the personal injury settlement proceeds do not disqualify injured individuals from receiving necessary benefits, the settlement proceeds should be deposited into a Special Needs Trust or Pooled Trust provided that the individual is under 65 years of age. These trusts allow the settlement proceeds held in trust to be exempt and not counted as assets of the beneficiary for the purpose of determining needs-based eligibility.

Estate Tax

If the settlement proceeds are in excess of $5 million, the plaintiff’s estate may be subject to Estate Tax upon the plaintiff’s death. It is important to ensure that as much of the settlement proceeds as possible are sheltered and protected from the Estate Tax. In order to do this, the plaintiff and the plaintiff’s spouse should consult with an estate planning attorney to draft trusts that establish “credit shelter trusts” which had the effect of sheltering as much of the settlement proceeds as possible from the Estate Tax.

Guardianship or Conservatorship

If the plaintiff is a minor or disabled individual who cannot manage their affairs, it will be necessary to open up a guardianship or conservatorship estate. Once a guardianship or conservatorship estate is opened, the court will oversee management of the individual’s assets. In the event of a minor plaintiff, the court will oversee the assets until the minor reaches the age of 18. If the plaintiff is a disabled individual, the court will oversee the estate for the remainder of their life or at such time as they recover from their disability and can again manage their financial affairs.

No matter what issues are involved, a personal injury settlement is a life-changing economic event and the plaintiff should consult with an attorney regarding their options. An experienced estate planning attorney Chicago IL trusts can guide you through the complicated process of setting up your estate plan in order to maximize the benefit received from a personal injury settlement.