Receiving a personal injury settlement can be life-changing, providing financial support after a challenging period. For many, a settlement doesn’t just cover immediate needs; it represents long-term stability, an inheritance for loved ones, and a buffer against future hardships. For those who have received a personal injury settlement, establishing an estate plan tailored to their specific needs can help protect their assets, ensure their intentions are clear, and provide peace of mind.

Lauenstein Law Firm works closely with clients to develop estate plans that take each individual’s unique financial situation into account. Here’s what you should consider when addressing estate planning after a personal injury settlement.

1. Setting Up a Trust to Protect Settlement Funds

One of the first steps to consider after receiving a personal injury settlement is deciding how best to protect and manage these funds. Creating a trust can be an effective way to control the distribution of the settlement while providing legal safeguards against potential creditors, future lawsuits, and even family disputes.

For clients with significant settlement amounts, a revocable living trust or an irrevocable trust may be suitable. These trusts allow you to dictate how and when your assets will be distributed. A revocable trust provides flexibility, allowing you to make changes as needed. An irrevocable trust, on the other hand, offers strong protection against creditors but is more rigid. The firm will work with you to determine the type of trust that aligns best with your goals.

A trust can also simplify estate administration, often bypassing probate, which means your beneficiaries receive assets without the delay and expense associated with probate proceedings.

2. Special Needs Trusts for Ongoing Medical and Personal Care

If you require ongoing medical care or rely on certain government assistance programs due to an injury, you may want to establish a special needs trust (SNT). These trusts are designed to hold personal injury settlements without affecting your eligibility for Medicaid, Supplemental Security Income (SSI), and other needs-based assistance.

An SNT enables beneficiaries to cover medical care, personal assistance, and other expenses without compromising government benefits.

3. Incorporating Health Care Provisions

After a personal injury, prioritizing health care directives in an estate plan is key. Health issues related to injuries can sometimes evolve over time, creating unforeseen medical needs that require prompt decisions.

Here are some important provisions to include in your estate plan:

• Advanced Medical Directives: Detailing your preferences for medical treatment should you become unable to make decisions.
• Durable Power of Attorney for Health Care: Appointing a trusted person to make health care decisions on your behalf.
• Living Wills: Outlining the medical treatments you wish to receive or decline in specific circumstances.

Having these documents in place allows your loved ones and medical professionals to follow your wishes without the burden of guessing your preferences during difficult times.

4. Beneficiary Designations and Life Insurance Planning

Many clients who receive personal injury settlements use a portion of these funds to secure their family’s future through life insurance. Designating beneficiaries on insurance policies and retirement accounts requires careful consideration, particularly if you wish to minimize potential estate taxes or avoid probate.

Lauenstein Law Firm takes the time to review each client’s insurance policies, 401(k) plans, and retirement accounts to ensure all beneficiary designations are current and in line with their estate plan. Coordinating these designations with the rest of your estate plan can prevent conflicts and ensure a smooth transfer of assets to your beneficiaries.

5. Minimizing Tax Liabilities

Although personal injury settlements are typically non-taxable, certain portions – such as punitive damages or settlements from emotional distress not tied to physical injuries – may be subject to federal and state taxes. Additionally, the way you choose to manage and distribute these funds could have long-term tax implications.

The firm assists clients in developing strategies that may reduce tax exposure, including gifting portions of the settlement to heirs, utilizing trusts, and investing in tax-advantaged accounts. Proper planning can help you make the most of your settlement, protecting the funds you worked hard to secure.

6. Planning for Potential Guardianship or Conservatorship Needs

In some cases, the impact of a personal injury is severe enough to warrant a conservatorship or guardianship to help manage assets and ensure the well-being of minor children or dependents. If you have dependents who may need financial support after your death or if your injury affects your ability to manage your own affairs, addressing guardianship in your estate plan is an important step.

Lauenstein Law Firm will guide you through appointing a guardian for minor children or other dependents and can work with you to establish a conservator who will responsibly oversee the distribution of your assets in the event of incapacitation. This foresight ensures your loved ones are cared for, and your estate is managed according to your preferences.

7. Ongoing Reviews and Updates to Your Estate Plan

Finally, an estate plan is not a one-time endeavor. Life changes, such as remarriage, new family dynamics, or changes in health, can all impact your estate planning needs. For those who have been through a personal injury, recovery, financial circumstances, and support needs may change over time.

Crafting Your Estate Plan with Lauenstein Law Firm

Estate planning after a personal injury settlement can feel overwhelming. Lauenstein Law Firm provides dedicated, one-on-one guidance to simplify these decisions, helping clients secure their financial future and protect their loved ones. 

With a thoughtful, well-structured estate plan, you can safeguard your settlement, plan for long-term needs, and bring clarity to the future—no matter what comes next.

If you’re ready to discuss your estate planning options, contact Lauenstein Law Firm today.