A Settlement Preservation Trust ("SPT") or Settlement Conservation Trust is an alternative periodic payment funding device that can be used alone or in combination with a structured settlement annuity. It can provide:
- Spendthrift protection
- Liquidity
- Flexibility
- If used in conjunction with a structured settlement, a receptacle to receive periodic payments from a structured settlement for further management and measured distribution
It's possible that a plaintiff will experience a major change in his/her financial position at some point following the settlement of his/her personal injury claim or lawsuit. A SPT provides financial flexibility and controlled liquidity when such a change occurs.A Settlement Preservation Trust is a tool that best serves Plaintiffs who have future needs that are uncertain, unpredictable, subject to adjustment and/or event contingent.
Other Features/Advantages of an SPT
- As interest rates rise, additional income accrues for the benefit of the plaintiff.
- The trustee can manage the trust to accommodate changes in the plaintiff's tax profile. For example if the plaintiff has significant medical expenses then taxable income might be preferable to permit offsetting deductions.
- As an example..when used in conjunction with a structured settlement one can protect structured settlement payments that were intended for college from wasteful dissipation by new adults.
Funding for a Settlement Preservation Trust (SPT) may take the form of a simple check or wire deposit. It does not require any Defendant/Insurer involvement It can come from any source, including directly from the plaintiff (via cash settlement), or it can be fed by way of payments from an annuity structured settlement.
Distributions can take the form of adjustable periodic payments, via check or ACH direct deposit, for medical health and tax needs, emergency needs and virtually any payment mode except life contingency. Limited personal discretion is a spendthrift feature of the SPT to protect the injured party.
Payments can be designed for both taxable or tax-free distributions.
The administration of the Settlement Preservation Trust is set up with the injured party in mind. Beneficiaries enjoy lower minimum deposits (typically $30,000-$50,000) and lower ongoing fees than one might expect from a trust company.
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