- 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 a structured settlement annuity .
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 from the trust 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. 4structures.com, LLC has a number of excellent relationships with a number of trustees. One of the trustees allows beneficiaries to enjoy lower minimum deposits (typically $50,000-$95,000 depending on type of trust) and lower ongoing fees than one might expect from a trust company.
Disadvantages of a Settlement Preservation Trust
- There is a cost to establish a trust
- There are ongoing trustee, maintenance, and asset management fees
- Trust principal while conservatively managed to preserve principal, is not guaranteed
- Interest inside the trust does not have the same tax advantages as a structured settlement.
Work with an experienced, credentialed settlement adviser like John Darer CLU ChFC MSSC RSP CLTC who can patiently explain the trust option and explore its viability as a component of your settlement plan.