If an individual with a disability receives needs-based government benefits like Medicaid or Supplemental Security Income (SSI), a settlement may compromise their eligibility. A Special Needs Trust (SNT) can shelter settlement proceeds from being counted as income.
When funding a Special Needs Trust (SNT), a structured settlement annuity can provide a cost-effective alternative to a cash lump sum. Keep reading to learn more about the benefits.
Solutions for Diminished Life Expectancy
The structured settlement can contain a “term certain” option, which allows the structure to pay a lump sum into the trust if the beneficiary dies prematurely. If the claimant is severely disabled, the structured settlement annuity provider may offer a “rated age.” A rated age indicates that the life insurance company expects the claimant to live a diminished life span. In turn, the structured settlement annuity may be purchased at a discounted cost, meaning that the claimant will get more for their money.
The settlement plan should be reflective of the individual claimant’s needs. For instance, the claimant may need to make adaptive modifications to their home and purchase an electric wheelchair. In these instances, the claimant will want to make a lump sum deposit into the SNT to cover immediate needs. The remaining funds can be set up to fund the SNT via a structured settlement annuity.
The trust will receive periodic payments if the claimant funds the SNT with a structured settlement annuity. In the meantime, the annuity funds will continue to grow income tax-free.
Highly-rated life insurance companies fund structured settlement annuities. Both the payments and the rate of return are guaranteed and provide ongoing funding for the SNT.
Because the trust is being funded with periodic structured settlement payments, the balance in the account will remain lower at any given time than it would if it had been funded with a cash lump sum. Trust account fees are typically scaled to the amount held within the trust. A lower balance means lower fees.
Make the Decision Early
The decision to use a structured settlement must be made before finalizing the settlement. Your settlement consultant can help coordinate with your attorney and Legacy Enhancement Trust to ensure you have a plan to meet your future needs.
Learn More About Funding SNTs with Structured Settlements
For more information about funding special needs trusts with structured settlement annuities, contact your settlement consultant or Legacy Enhancement Trust today.
Sage Settlement Consulting is the nation’s largest plaintiff-oriented settlement planning firm. Their settlement consultants work collaboratively with claimants, their families, and their attorneys to provide knowledgeable guidance and ensure future financial security. For more information, visit their website.