The Importance of Settlement Plans in Resolving Legal Disputes

Effective settlement agreements turn misunderstandings into understanding and conflicts into resolution. They do not magically spring into existence fully formed, however. They must be crafted in advance and require careful preparation.

Preparation is Key

The settlement plan is the cornerstone of any legal settlement. It can include a structured settlement, which distributes proceeds over time to avoid taxation and help preserve eligibility for income-based government benefits.

For example, an effective insurance claim settlement agreement requires attorneys to survey existing policies and carefully catalog the pending causes of action. It is common for attorneys to need to understand the scope of existing insurance coverage or the identity of existing parties.

Plaintiffs enrolled in needs-based public benefits, such as Medicare and SSI, must consider using structured settlements to preserve their funds and avoid triggering resource and income limits. Similarly, catastrophically injured clients might need to use tools such as trusts or methods of complying with Medicare’s secondary payer rules.

Structured Settlements

Structured settlements offer many advantages to injured parties, including a steady stream of income that is protected from inflation and can be more difficult for creditors or ex-spouses to access. On the other hand, they can be less flexible and may not adequately cover sudden financial needs like unexpected medical bills.

Typically, structured settlements are awarded to plaintiffs in 

cases such as personal injury, workers’ compensation, medical malpractice, or wrongful death suits. They allow beneficiaries to receive their settlement in periodic payments rather than a lump sum and are usually tax-free.

However, they can also be limiting because they cannot adapt quickly to changing financial needs and are often locked into an agreement with one specific annuity company. Additionally, if the owner of a structured settlement decides to sell their future payments, they will have to pay a discounted rate. This can significantly reduce the value of their award. This is why it’s important to consult an expert before deciding on your best settlement plan.

Trusts

Trusts are crucial in fostering collaboration, cooperation, and mutual understanding among parties. However, disputes involving trusts can arise for various reasons, including breaches of fiduciary duty, mismanagement of assets, and disagreements between beneficiaries.

When a trustee is involved, it is important to consider their fiduciary duties and the laws defining them. A trustee must evaluate specific settlement products and trust product providers and their business practices, utilizing the same fiduciary standard that applies to the injured party.

A structured settlement company can help you find the best planning options to meet your needs. Whether you are interested in a special needs trust, pooled trust, or other settlement protection devices, we can provide the advice you need. 

Medicare Set Aside

Medicare Secondary Payer compliance is one of the most complicated yet critical aspects of settlement planning. While an MSA is not mandatory in workers’ compensation settlements, it is highly recommended in liability cases.

An MSA is a document that details how much money should be set aside from a settlement to recognize and meet Medicare’s interests for future medicals. It is the Centers for Medicare & Medicaid Services (CMS) preferred method for addressing CMS’ MSP requirements and gives all parties confidence that Medicare’s interests are being recognized and met. A Medicare Set Aside can be established as a lump sum account or through an annuity. Regardless of the MSA type, it is vital to have professional account administration to keep accurate accounting records of all distributions and expenditures.