If you receive a personal injury award, it will almost certainly affect your estate plan. If you do not already have an estate plan, you should put one into place immediately. Any time there is a major change in your life, (and a personal injury award certainly qualifies!) you need to revisit your estate plan. A personal injury award likely brings several new life issues to consider.
An estate plan is about more than just disposing of your assets after you pass away. It can also help protect your assets from creditors and protect your needs and wishes if and when you can no longer see to them yourself due to disability or infirmity.
Protection from Creditors
A personal injury award likely includes funds to replace lost future wages. It may be expected that you will have to live on this money for the rest of your life. You can’t risk your future by leaving these funds vulnerable to future creditors. Your estate plan may need to include provisions to make sure that your money is protected from creditors and from spendthrift family members. By putting funds in an irrevocable trust, those funds are protected from creditors and misuse.
Protecting Your Needs and Wishes
In setting up the trust, you can set up the rules for how the funds are managed and spent. You can set a personal “salary” to come out of the trust to live on. You can instruct that money is spent for your own care, well-being, and even entertainment when you are too disabled or incapacitated to make these decisions yourself anymore. And, of course, you can describe what should happen to the funds when you pass away.
State and Federal Tax Planning
A complete estate plan will also seek to reduce your current State and Federal taxes as well as minimize your estate taxes. An estate planning attorney relies on can work in collaboration with your accountant or a tax expert to make sure you don’t pay too much.
A personal injury award, as I mentioned, may need to last your entire life. It is important that you seek the advice of a competent investment planner to make sure that it does. Your investment plan overlaps and works in conjunction with your estate plan so, just like with taxes, your estate planning attorney and your investment expert need to collaborate.
Revisiting your estate plan is always a good idea after any major life change. Receiving a personal injury award is no exception.