Incorporating a Settlement into an Estate


Accidents happen every day, and they are often challenging to plan for because of their unexpected nature. When a victim suffers an accident at the hands of another, they may have the opportunity to take legal action against the negligent party. With the assistance of a personal injury lawyer, like our friends at Cohen & Cohen, victims can take legal action for their damages. After a successful outcome, victims should use the settlement to cover any losses, but it's important to note that there could be a substantial amount of money left over. In addition to this, victims may require long-term medical care due to the accident. Because of this, victims must outline their wishes within an estate plan. Engaging in the estate planning process makes it possible to have a clear plan for the future.


Estate Planning, A Brief Overview

Estate planning is a vital tool for laying out a plan for the future. These plans are made up of a series of documents put in place during a person's lifetime. They can outline plans for while a person is still living and for when the time comes that they pass away. Key documents that make up an estate plan include:


  • A Will
  • Trusts
  • Beneficiary Designations
  • A Living Will
  • Healthcare Directives
  • Power of Attorney

All of these documents serve different purposes. Based on the situation, a lawyer can help to strategize estate planning in a way that minimizes taxes and expenses, reduces the number of assets that pass-through probate, plans for incapacitation, protects assets from creditors, and ensures beneficiaries receive the assets they are entitled. 


Managing the Settlement

After receiving an asset as substantial as a settlement, it's essential to make efforts to protect it. Estate planning can play a key role in this process as the estate plan allows the opportunity to protect it in the event of incapacitation and ensure that it is distributed appropriately after your passing. One important consideration is tax. While most settlements are tax-free, they could be taxed when gifted or transferred to another person. An attorney can explore the possible options available to minimize potential taxes. One viable option to consider is developing a trust for these assets as a way to avoid passing these assets through probate and clearly outlining how these assets should be invested, managed, and distributed to beneficiaries.