Estate Planning After Personal Injury Settlements
Receiving a personal injury settlement can provide much-needed financial relief after an accident or injury. Because personal injury settlements often involve significant amounts of money, consulting with legal experts is vital to ensure that any money received will be protected. Developing a comprehensive estate plan is one method of ensuring the preservation and effective distribution of your settlement funds. At Smith Taire Legal Group, our experienced Georgia estate planning attorneys understand the importance of protecting personal injury settlements and their often-overlooked relationship to estate planning.
Why Would You Want to Protect Your Personal Injury Settlement?
Without proper protection, personal injury settlements may be subject to various risks and challenges that can jeopardize the funds and diminish their value. Unprotected settlements can be susceptible to threats such as claims from creditors and legal disputes. You can establish legal mechanisms to secure your funds by engaging in estate planning.
For example, creating a trust can separate the settlement funds and your assets, making it more challenging for creditors to seize the funds. Working with a skilled estate planning attorney can help you develop a reliable framework to safeguard your settlement, offering you peace of mind and financial security.
What is the Difference Between a Will and a Trust?
A will and a trust are essential estate planning tools but serve different purposes. A will is a legal document that outlines your wishes regarding the distribution of your assets after your death. It designates beneficiaries, appoints guardians for minor children, and specifies an executor to carry out your instructions.
On the other hand, a trust is a legal entity that holds and manages assets for the benefit of the designated beneficiaries. Unlike a will, a trust goes into effect immediately after it is created, allowing for the ongoing management and protection of assets during your lifetime and beyond. For more information on the important differences between wills and trusts, refer to our previous article here.
Why Do I Need a Will?
A will is crucial for everyone, regardless of whether you have a personal injury settlement. A will ensures that your wishes are respected and your assets are distributed according to your instructions. In the context of a personal injury settlement, a will can specify how the settlement funds should be allocated, who should receive them, and any conditions or restrictions you may want to impose. Additionally, a will allows you to appoint guardians for minor children, name an executor to oversee the distribution of assets, and potentially minimize estate taxes.
When creating a will after a personal injury settlement, it’s important to consider the specific circumstances arising from it. You may want to include provisions that protect the funds for long-term care or medical expenses related to your injury. By incorporating these details into your will, you can ensure that your settlement funds are used wisely and provide for your future needs.
Why Do I Need a Trust?
While a will is important, a trust can offer additional benefits and protections, especially in the context of a personal injury settlement. One of the primary advantages of a trust is its ability to provide ongoing management of your settlement funds. By placing your funds into a trust, you can designate a trustee responsible for managing and investing the assets. This can ensure that the funds are used wisely, protected from potential creditors, and distributed by your wishes.
Unlike wills, trusts can allow you to avoid probate and provide greater privacy as they are not part of the public record. Additionally, trusts can offer more flexibility regarding how and when settlement funds are distributed. This added layer of protection can ensure that your settlement funds are used in a way that aligns with your best interests.
Tax Benefits of a Trust
Estate planning can offer significant tax benefits, particularly regarding estate taxes. While the laws surrounding estate taxes may vary, in many cases, personal injury settlements are not subject to federal income taxes. However, once the settlement funds are invested and generate income, those earnings may be subject to income taxes. By utilizing a trust and implementing effective tax planning strategies, you can potentially minimize income taxes and protect the funds received from your settlement. Certain types of trusts, such as irrevocable life insurance trusts (ILITs), can also help to reduce estate taxes. These trusts allow you to remove life insurance proceeds from your taxable estate, ensuring that the settlement funds and other assets are preserved for your beneficiaries.
How an Estate Planning Attorney Can Help
At Smith Taire Legal Group, our dedicated attorneys specialize in estate planning and personal injury cases. If you need legal advice regarding a personal injury claim, or assistance creating or revising your estate planning documents, Jammie Taire and the Smith Taire Legal team can help. We educate our clients on their estate planning options and ensure their final wishes are legally binding. Call us at 678-253-8133 if you have questions about your estate planning or wish to meet with an experienced Georgia estate planning attorney.
