INTRODUCTION: BEYOND THE CHECK
When a personal injury case concludes, the attorney’s work often seems complete upon securing a favorable settlement. However, for clients who are elderly, disabled, or minors, simply handing over a check can immediately terminate essential public benefits like Medicaid or Supplemental Security Income (SSI) — often with little warning and no easy path to reinstatement. Settlement planning is the practice of thoughtfully architecting the legal structure of how a claimant receives settlement proceeds to preserve eligibility for these benefits while maximizing the client’s quality of life.
And even for clients not receiving public benefits — such as minors or adults who have never managed substantial assets — settlement planning provides critical protection against misspending, predatory actors, and financial exploitation. While this article focuses on benefits preservation as the most technically demanding application, the underlying principle is universal: Vulnerable clients deserve thoughtful legal and financial architecture, not just a check.
Rather than viewing this as a niche specialty, attorneys should recognize settlement planning as a core competency — a form of “legal architecture” that designs administrative and financial structures tailored to each client’s unique circumstances and long-term needs.
THE STAKES: WHY SETTLEMENT PLANNING MATTERS
Public benefits often provide irreplaceable healthcare coverage, caregiving, and income support for vulnerable populations. A single misstep in handling settlement funds can trigger immediate benefit termination and aggressive recovery actions by government agencies, leaving clients without critical resources. Consider these realities:
- Medicaid provides comprehensive healthcare coverage, including independent living supports, as well as long-term care services, which private insurance often does not cover.1
- SSI provides essential income for individuals with limited resources and can also serve as a gateway to Medicaid eligibility in many states.2
- State Medicaid agencies aggressively pursue recovery of benefits paid and can consume settlement proceeds intended for the client’s future care — sometimes seizing funds before the client or counsel realizes the error.3
When a settlement is on the horizon for a client receiving — or potentially eligible for — public benefits, the stakes demand proactive planning. Once benefits are terminated and enforcement begins, remediation is difficult, expensive, and often incomplete.
KEY TOOLS IN THE SETTLEMENT PLANNER’S TOOL KIT
Effective settlement planning draws on a range of legal tools. Understanding when and how to deploy each one is essential.
Special needs trusts (SNTs)
Also known as supplemental needs trusts, SNTs allow settlement funds to be held for a beneficiary’s supplemental needs — those not covered by public benefits — without disqualifying the beneficiary from means-tested programs.4 There are two types of first-party special needs trusts used in settlement planning:
- Pooled SNT, or (d)(4)(C) SNT: Pooled trusts are a specific type of special needs trust authorized under 42 U.S.C. § 1396p(d)(4)(C). Rather than a trust drafted for one individual, a pooled trust consists of one master trust agreement, and individuals’ funds can be administered according to the trust by signing a joinder agreement. The pooled trust is administered by a nonprofit association for the benefit of individuals with disabilities. Each beneficiary maintains a separate subaccount, but the funds are pooled for investment and management purposes, allowing for economies of scale and professional administration. Pooled trusts are particularly useful for individuals over 65 on SSI or those with smaller settlements that do not justify the cost of establishing a standalone SNT.5
- Standalone, “payback” SNT, or (d)(4)(A) SNT: This is a custom-drafted trust for a particular beneficiary, funded with the beneficiary’s own assets (e.g., settlement proceeds). These trusts must include a “payback” provision requiring that remaining funds at the beneficiary’s death be used to reimburse Medicaid for benefits provided.
A caution: SNT establishment and administration must comply with unforgiving federal statutes, regulations, and Social Security Administration policies. Even minor technical defects in how a trust is created or drafted can render assets countable, triggering immediate benefit termination and exposing clients to recovery actions. This is not an area for generalists to dabble in — attorneys should engage specialists with demonstrated expertise in special needs planning.
Achieving a better life experience (ABLE) accounts
ABLE accounts are tax-advantaged savings accounts authorized under federal law. Individuals with disabilities that began before age 46 may contribute up to a set annual limit ($20,000 in 2026) without affecting benefit eligibility. These accounts are easy to establish and maintain, though contribution limits make them best suited for smaller settlements and as a complement to an SNT.6
Structured settlements
Rather than receiving a lump sum, clients may opt for structured settlements — periodic payments over time, often funded through annuities. Structured settlements can offer tax advantages and protect against the rapid dissipation of funds. When combined with SNTs, structured settlements provide a powerful mechanism for long-term financial security.7
THE HAWTHORN MATTER: A SUCCESS STORY IN SETTLEMENT ARCHITECTURE
In the Hawthorn class action, more than 50 minors — each with a significant mental health history and many in the custody of the State — were to receive settlement proceeds stemming from their treatment at the state-run Hawthorn psychiatric facility. The litigation was situated in the Michigan Court of Claims, requiring broader procedural coordination.8
As class counsel, I was appointed early in the process, which allowed for a comprehensive assessment of each minor’s legal capacity, benefit eligibility, and long-term needs. That assessment informed our central conclusion — supported by a court-appointed Guardian ad Litem (GAL) — that a 42 U.S.C. § 1396p(d)(4)(C) pooled special needs trust was the most effective mechanism to protect the minors’ eligibility for Medicaid and SSI while ensuring secure, professionally managed access to their funds.
I issued a formal Request for Proposals (RFP) to qualified nonprofit pooled trust administrators, and one was selected for its transparency, systemic reliability, insurance coverage, and processing capacity. Negotiated terms included a full waiver of setup fees and reduced monthly fees, preserving greater value for each minor.
To implement this structure, GALs were appointed for every child in State care and in cases where parents were unwilling or unable to act. These appointments proved essential — not only to represent each child’s legal interests but also to execute trust documents and joinders swiftly and uniformly. This eliminated the need for bonded conservatorships, saving families from administrative delays, filing fees, and ongoing probate reporting.
All trust joinders were approved pursuant to MCR 2.420,9 and funding was routed through a Qualified Settlement Fund (QSF), preventing constructive receipt and ensuring legal compliance. The result was a streamlined, economically efficient process that met the court’s obligations, preserved public benefits, and protected the best interests of vulnerable minors.
The Hawthorn settlement architecture delivered measurable results: 50+ minors protected, zero benefit terminations, no probate costs, and every dollar of settlement proceeds paid timely while preserving children’s futures. For practitioners, the lesson is clear: Early engagement of expert counsel transforms a potentially complex disbursement scenario into streamlined, durable protection that withstands regulatory scrutiny, provides continued support with checks and balances, and serves clients for decades in the most economic manner possible. The framework is replicable; the expertise is specialized.
BUILDING A NETWORK: COLLABORATION IS KEY
Settlement planning is inherently interdisciplinary. Attorneys need not — and should not — work in isolation. Building relationships with the following professionals can enhance outcomes:
- Settlement brokers and certified financial advisors: Specialists who can model different scenarios and recommend optimal structures.
- Benefits coordinators: Experts who understand the intricacies of Medicaid, SSI, and other programs.
- Trust administrators: Professionals or organizations capable of managing SNTs or pooled trusts in compliance with legal requirements.
- Accountants and tax advisors: Essential for navigating the tax implications of settlement structures.
Collaboration ensures that all aspects of a client’s situation are considered and that the settlement plan is both legally sound and practically effective.
Thorough vetting protects clients from mismanagement and helps ensure that trust funds truly enhance quality of life.
PRACTICAL TIPS FOR THE BUSY PRACTITIONER
- Screen early: At intake, identify clients who receive or may qualify for public benefits.
- Consult specialists: Before settlement planning issues arise, seek guidance from attorneys with relevant expertise. You plan your case strategy carefully, and architecting the end result for the client is just as important.
- Educate clients: Help clients and their families understand the implications of different settlement options. Attorneys who create the legal architecture are in the best position to identify issues and opportunities relevant to the client’s post-litigation success.
- Document carefully: Maintain clear records of the settlement planning process to demonstrate due diligence and compliance.
CONCLUSION: ARCHITECTURE FOR THE LONG TERM
Settlement planning is not an afterthought; it is an integral part of effective client representation. By engaging counsel who have mastered the tools and principles of settlement architecture, attorneys can design outcomes that truly serve their clients’ long-term interests — turning hard-won recoveries into results that endure. This applies not just to cases with complex delivery challenges but to every vulnerable client. Settlement architecture is not merely a best practice — it is the standard of care.