United Brachial Plexus Network, Inc.

We split between structured and trust. We set up the structured portion to pay back out in the future after our child reaches adult age with payouts at 25, 30, 35, and 40 years of age to protect the child against getting there hands on everything at 18 and doing financially imprudent things (we've heard horror stories). The trust dollars (majority of settlement) are used to fund current and foreseeable expenses and to, hopefully, provide a better return for our child. A good trust company will have significant experience in handling these types of arrangements and should assist you in setting up an annual budget with the probate court so you have some flexibilty in dealing with costs as they arise. This prevents going back to the court for every expenditure, which is costly and time consuming. Rules usually govern what types of investments can be made by trustees in order to protect the trust money from being used for risky investments. If the court doesn't provide this protection, make sure the trust documents create a clear set of controls on investing so as not to let advisors take undue risk with your child's money - it happens!

Your question is interesting as I would recommend a trust even with a structured settlement. I will try to explain. If you receive settlement proceeds through a structured settlement the interest on the principle also become no taxable. The basic settlement amount is never subject to tax but if you take the funds without a structure the interest on the principle is taxable. The structure protects all of the funds, principle and interest from tax.

Even with a structured settlement I would recommend setting up a special needs trust for your child. The money from the structure can be paid into a special needs trust. With a trust you can control the age your child and under what conditions your child has access to the money. Also, the special needs trust allows your child to still receive certain government benefits.

If you accept the settlement money without a structure you certainly should also have a special needs trust.

The decision to accept the settlement money through a structure is truly one of numbers. For example, if the structured settlement is running at 4.5% tax free, you would need to return approx. 7.5-8% on an investment to net the same amount after paying the tax. It is possible to achieve that rate of return with a good investment advisor but there is no certainty. You certainly could get less with a poor investment plan or a down market. The structure is set and guaranteed. This give some people piece of mind. Also, it takes away the need to spend the time dealing with the investments.

This is a basic explanation of a complex issue. If anyone has more questions, please feel free to contact me directly and I would be pleased to explain more.

Ken Levine
617-566-2700
Klevine@Klevinelaw.com
http://www.Klevinelaw.com

Selling a portion or all of your structured settlement isn’t a decision one makes overnight. Review your settlement with consideration. Take into account the cost of living adjustments or lump-sum payments on special dates. Then evaluate the role your settlement plays in the monthly budget whether your settlement cover all or just a quarter of your monthly expenses?