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  • Pooled Settlement Trusts: A Low-Cost Solution for Protecting a Settlement

    When a person suffers an injury, it can have devastating consequences on every aspect of their life. The ability to earn a living can be lost. Sky high medical bills can accumulate in the blink of an eye. Credit can be ruined in an instant. Frequently this leads to the need to effectively manage the personal injury recovery at settlement. This is where a pooled settlement trust can help.

    A pooled settlement trust is a unique solution for protection of a client’s recovery while still giving them much needed flexibility to adapt to changes in circumstances. With a pooled settlement trust, the client does not need to have an individually crafted trust document. Instead, they join a master trust by way of a joinder document. The trust is managed by a non-profit entity who created it and acts as trustee. As a result of this arrangement, it is a low-cost way for a client to set up a trust for their benefit or for a family member’s benefit. Given its low-cost and inherent flexibility, there are many situations where it can be of great benefit to a personal injury victim at settlement.
    There are a few key situations where a settlement trust becomes an invaluable tool at settlement. First is a competent adult looking for a low-cost mechanism to manage their financial affairs and protect themselves from spending too quickly. Second is a minor child or someone who is legally incapacitated for whom the family desires an alternative to a traditional guardianship arrangement. Third are those clients who are disabled but not currently eligible for needs-based benefits or those who want to lose eligibility post-settlement. For these clients, the settlement trust can provide flexibility as well as liquidity now but provide for their assets to be moved into a pooled special needs trust should they need to qualify or requalify for needs-based public benefits.

    I will further expand on those three scenarios below and how a settlement trust can make a lot of sense as a solution. For a competent adult looking to manage their recovery, a settlement trust paired with a structured settlement can provide the ultimate in flexibility and liquidity. By pairing the structured settlement with a trust, it allows the client to take advantage of the tax-free nature of the investment of a structure while also giving them a cash reserve managed inside the trust. The client can use the structure as a fixed investment part of their portfolio and not pay any management fees inside the trust on the principal invested in the annuity. The structured settlement is set up to irrevocably pay into the trust so that all money accumulates in the trust and can be disbursed to them based on their needs. However, as their needs change so can the income the trust distributes to them. As an added benefit, pairing a structured settlement with the settlement trust provides enhanced protection of the money from judgments and creditor claims as well as guarding against rapid liquidation.

    In the case of a settlement for a minor child or someone who is incompetent, the trust solution is a great alternative to a guardianship/conservatorship which has many drawbacks. It allows assets to be protected within the trust and professionally managed. As with a competent adult scenario, when paired with a structured settlement, it provides significant protection from creditors, judgments, and potential rapid dissipation. Also, by having structured settlements payable into a trust irrevocably, it prevents the client from ever selling their annuity on the secondary market to predatory companies like J.G. Wentworth. With a comprehensive plan including a settlement trust, the client has a fiduciary that can protect them from spending their settlement too quickly and help manage their financial affairs well into the future. In some instances with minors, the trust can be set up to make lump sum distributions of principal at pre-determined ages to liquidate the trust. Typically, a settlement trust will be cheaper to administer versus a guardianship/conservatorship.

    For those who are disabled and may be currently eligible for government assistance, but don’t want to continue with the monetary restrictions that come with these programs, a settlement trust may be a good alternative. Additionally, if a client may need to become eligible for programs such as Medicaid/SSI in the future but isn’t currently eligible, a settlement trust is also a viable solution. A settlement trust will have provisions that allow the trustee to provide for healthcare and make distributions without restrictions when there is no eligibility for government assistance but allows for assets to be transferred into a pooled special needs trust should it become necessary to qualify. Many clients prefer to try private healthcare insurance policies instead of remaining in the government benefit system and this type of trust allows for that while preserving their ability to fall back on government assistance in the future. As with competent adults, minors and those who have been rendered incompetent, marrying a structured settlement with this type of trust offers all the same benefits for someone who is disabled. They get a tax-free investment in the structured settlement which isn’t subject to the trustee fees like the assets held in trust would be. The trust and the structure protect against spending the money they recovered too quickly. Finally, they get the enhanced creditor and judgment protection.

    Pooled Trust Services created a pooled settlement trust specifically for the types of personal injury settlements discussed above. Settlement Management National Pooled Trust (SMNPT) is a pooled settlement management trust that offers injury victims a low-cost trust solution for their settlement. By joining the SMNPT, an injury victim can protect their settlement proceeds, have professional management of their money with affordable trustee fees and obtain needed healthcare coverage through the Affordable Care Act. The trustee of the SMNPT is the Foundation for Those with Special Needs a 501(c)(3) non-profit created specifically to act as trustee for trusts such as this. The investment advisory services are provided by True Link Financial. Trust participants have access to the True Link Visa card to make using their trust money easier and faster. SMNPT offers safety, protection, growth, and liquidity for injury victims at an affordable price.


Many of my clients have joined or have helped a family member join the Settlement Solutions National Pooled Trust. My experience working with this pooled trust has always been very positive.

Derek B. Alvarez, Tampa, FL

The Settlement Solutions National Pooled Trust are user friendly, fast, efficient and most importantly cost effective.

Anthony F. Diecidue, Esq., Tampa, FL

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