Understanding Trust Planning in the Settlement Space:

Demystifying What Happens Post-Settlement and How Proper Trust Structure Protects Clients

The goal of this article is to discuss the challenges that arise post-settlement, understand what a corporate trustee’s role is in trust administration, explore trust structures that can protect clients, and identify situations where trust planning may be appropriate. By incorporating trust planning into the settlement phase, attorneys can safeguard the client’s long-term stability and preserve the integrity of the settlement they worked hard to secure.

Post-Settlement Landscape:

The transition from litigation to life after the settlement can be a delicate time for both the plaintiff attorney and their client for a variety of reasons. A sudden influx of funds can disrupt benefits, strain family dynamics, and create financial pressures that many clients are not prepared to manage on their own. Without some form of protective structure, those post-settlement challenges can grow quickly and unexpectedly.

Sudden-wealth dynamics can destabilize even the most grounded clients. Individuals who have lived with scarcity may struggle to manage a lump sum responsibly. Family members may see the settlement as communal property. Friends may ask for loans. Predatory lenders and salespeople may appear within days. Clients with cognitive limitations, mental-health challenges, or addiction histories face additional layers of vulnerability. Without structure, oversight, and support, settlement funds can evaporate quickly.

 For clients who receive means-tested benefits, the risks are even more acute. For example, a single deposit into a personal checking account may trigger the loss of TennCare (Tennessee’s Medicaid program), Supplemental Nutrition Assistance Program (SNAP), Families First (Tennessee’s Temporary Assistance for Needy Families program), or Supplemental Security Income (SSI). Reinstating those benefits can take months, during which time the client may lose access to medical care or essential services.

Minor children are a particularly vulnerable group. As such, Tennessee law requires more safeguards for settlements on behalf of minor children and can require additional oversight for managing those proceeds. For example, Tennessee Code § 29-34-105 requires that a court conduct a hearing if a tort claim settlement on behalf of a minor involves a settlement of $10,000 or more, a structured settlement, or a minor who is not represented by a licensed attorney. Even the most sophisticated families often underestimate the complexity of managing funds over the course of many years. A parent or relative may be well-intentioned but ill-equipped to handle fiduciary responsibilities.

The risks outlined above are not hypothetical – they are issues that generate panicked phone calls months after a case closes. This can lead to situations that create family conflict, loss of benefits, or allegations that the attorney should have forewarned the client. These are problems that proper trust planning is designed to prevent.

What a Corporate Trustee Actually Does:

Many trial attorneys have only a passing familiarity with corporate trustees. They may assume that trustees simply distribute funds or manage investments. In reality, the trustee’s role is far more comprehensive and aligned with the attorney’s goal of protecting the client.

Fiduciary Duty and Neutrality. Trustees operate under a strict fiduciary standard, which provides the legal and ethical framework that governs every decision a trustee makes. Tennessee law imposes several core fiduciary duties on trustees, each designed to protect the beneficiary and ensure the trust is administered with integrity and care.

The Tennessee Trust Code outlines several key obligations. The duty of loyalty (TN Code § 35-15-802) requires the trustee to administer the trust solely in the interest of the beneficiary. The duty of care (TN Code § 35-15-804) obligates the trustee to administer the trust under the prudent person standard. The duty to administer (TN Code § 35-15-801) ensures that the trustee continues to manage the trust in good faith in accordance with the trust’s terms and purpose until the trust terminates or a successor trustee takes over. Trustees must also observe the duty of impartiality (TN Code § 35-15-803), treating beneficiaries fairly when multiple interests are involved, and the duty to inform and report (TN Code § 35-15-813), which requires keeping beneficiaries reasonably informed about the trust’s administration and providing clear and accurate accounting. To summarize, the fiduciary standard is important because it ensures that decisions are made solely in the beneficiary’s best interest, grounded by the principles of loyalty, prudence, and transparency.

Distributions and Budgeting. One of the most meaningful roles a trustee plays is helping beneficiaries understand how to pace their resources. A corporate trustee brings structure to this process by developing a plan of distribution, reviewing distribution requests, balancing immediate needs with long-term goals and sustainability, and helping clients understand the purpose and limits of the trust. This guidance is particularly important when a settlement trust must last for decades or serve as the beneficiary’s financial foundation. By providing budget support, monitoring spending patterns, and preventing depletion of trust resources, a corporate trustee can provide stability and informed guidance, while also maintaining accurate records of every distribution to support transparency and long-term planning.

Investment Management. Settlement funds require a thoughtful investment strategy that accounts for the beneficiary’s age, life expectancy, medical needs, trust duration, and appropriate risk tolerance. Corporate trustees work with investment professionals to build portfolios tailored to the trust’s purpose and duration. Ensuring that investment decisions align with the trustee’s fiduciary duties helps preserve the assets of the trust, especially if the settlement proceeds are intended to support the beneficiary for decades.

Benefits Compliance. For clients receiving means-tested benefits, such as TennCare or SSI, compliance is not optional. Corporate Trustees can utilize trust funds to assist the beneficiary, or the beneficiary’s legal guardian, as needed in the pursuit of government benefits. For example, the trustee can collaborate with care advisors to evaluate the beneficiary’s needs, understand the services they rely on, and determine how trust resources can supplement public benefits. By coordinating benefits compliance with thoughtful care planning, the trustee helps preserve eligibility while ensuring the beneficiary receives the support necessary to enhance their quality of life.

Long-Term Support for Clients and Families. Perhaps most importantly, corporate trustees provide continuity. They remain involved long after the attorney’s role has ended, offering guidance, structure, and stability as the client’s needs evolve. This behind-the-scenes work is what transforms a settlement from a temporary resource into a long-term foundation.

Examples of Trust Structures that Protect Clients:

Not every client needs the same type of trust. The key is customizing the structure to match what is appropriate for the client’s current circumstances, as well as long-term plans. Several trust types are particularly relevant in the personal-injury space.

Special Needs Trusts. For clients receiving or who have a need for means-tested government benefits post-settlement, a first-party special needs trust (often abbreviated “SNT”) is often essential. It allows settlement proceeds to enhance the client’s quality of life without jeopardizing the public benefits that provide medical care, long-term services, and essential daily support. A corporate trustee plays a critical role here, not only ensuring compliance with federal and state rules, as well as managing distributions, but in understanding the client’s lived reality and administering the trust in a way that supports both dignity and stability.

Consider a thirty-year-old former bull rider who sustained a catastrophic traumatic brain injury and quadriplegia in a vehicle accident. He now lives with his parents, who have become his full-time caregivers and the center of his daily life. Despite the severity of his injuries, the family remains deeply committed to helping him experience joy – time on the boat together, camping trips, and shared routines that preserve a sense of normalcy. His mother cannot work outside of the home due to the level of care he requires, so she receives caregiver pay through an agency that the trust partners with, ensuring she can continue providing the support he depends on.

In this family’s case, the special needs trust does far more than preserve TennCare and SSI. It creates continuity. The trustee understands the family’s rhythm, the beneficiary’s needs, and the practical realities of his care. The trustee knows the professionals involved, from the CPA to the care coordinators, and manages the financial and administrative responsibilities that keep the beneficiary’s world stable. And when his parents are no longer able to serve as caregivers, the plan is for his siblings to step in. Because a corporate trustee has been involved from the beginning, that transition will be seamless: the trustee already knows the beneficiary’s routines, the family’s expectations, how the trust supports and enhances daily life, and the long-term plan for sustaining the beneficiary’s care.

This is the quiet, but profound, value of a corporate trustee in the special needs trust context. It is not simply about compliance. Rather, it is about continuity, stability, and ensuring that the settlement continues to support the beneficiary throughout his or her life.

Settlement Protection Trusts. These trusts are designed for clients who do not receive government benefits, but still need structure. The trust provides financial support and creditor protection. This type of trust is especially valuable for clients with limited financial experience or those at risk of exploitation, such as minor children.

A powerful example comes from a case involving three minor children whose mother was tragically killed in a vehicle accident. The children received a life-altering settlement, one that, if managed wisely, could create true generational wealth. From the beginning, the beneficiaries were included in age-appropriate conversations about the “big picture.” Long before they turned eighteen, they were introduced to concepts of financial responsibility, stewardship, and the purpose of their trusts. These early discussions were designed to equip them with a solid foundation. The trustee worked alongside the family to help the children understand how money functions, how it can support long-term goals, and how thoughtful decision-making preserves options for the future.

Now that all three beneficiaries are adults, the impact of that early structure is undeniable. They have learned to advocate for themselves and to appreciate the value of pacing, planning, and protecting their resources. Instead of being overwhelmed by sudden wealth at eighteen, they entered adulthood with a foundation of financial literacy and a healthy respect for the responsibilities that accompany significant assets.

Settlement protection trusts can be a useful mechanism that not only safeguards settlement proceeds, but also shapes a beneficiary’s habits, builds confidence, and creates continuity across the years when children grow into adults. With a corporate trustee providing consistent guidance, the trust becomes a stabilizing force that helps beneficiaries navigate a world of money with maturity and intention.

Spendthrift and Creditor-Protection Provisions. Spendthrift and creditor-protection provisions shield trust assets from creditors, lawsuits, and family conflict, and can be particularly important to clients with unstable family dynamics or vulnerabilities. This is accomplished by language incorporated in the trust instrument that restricts the beneficiary from pledging future distributions and prevents creditors from seizing trust assets. Although the beneficiary is unable to access large sums of money from the trust at his or her direction, he or she can still receive ongoing distributions at the Trustee’s discretion. This ultimately prevents misuse of funds and protects trust assets should the beneficiary become the subject of a lawsuit.  Ultimately, when paired with a corporate trustee, spendthrift and creditor protection provisions can create a barrier between the beneficiary’s resources and the outside world, ensuring that the settlement continues to serve its intended purpose even when circumstances change.

Two real-world examples illustrate this protection in action. In one case, a sixty-year-old beneficiary used his settlement proceeds to fund an asset protection trust. Several years later, he experienced a sudden medical event that resulted in staggering medical invoices. While his employer-provided insurance ultimately covered the bulk of the expenses, the trust’s spendthrift provisions ensured that the trust assets were never at risk. Potential creditors could not access the trust resources, giving the beneficiary and his family peace of mind during a stressful period.

In another case, a young man undergoing a contentious divorce faced the possibility that his settlement funds would be factored into alimony calculations. Because those funds were held in an asset protection trust with strong spendthrift language, the court could not treat the trust assets as available resources. The trust shielded those funds from being pulled into the divorce proceedings and preserved the assets for their intended purpose: to support the beneficiary’s long-term needs.

In both instances, the corporate trustee was pressured (sometimes, aggressively) to turn over information about the trust or to make the assets available. The trustee’s role, however, is to uphold the terms of the trust and the protections built into it. Corporate fiduciaries are trained to navigate these requests with clarity and professionalism, ensuring that the trust’s protective provisions remain intact. Its experience with creditor inquiries and third-party demands allows the corporate trustee to respond appropriately, without the emotional pressure or uncertainty that can accompany these moments.

Withdrawal Provisions and Age-Attainment Language. Many trusts include withdrawal provisions or age-attainment milestones that allow beneficiaries to access a portion of their funds at certain ages or intervals. When drafted thoughtfully, these provisions strike a balance between giving beneficiaries meaningful autonomy and preserving the long-term purpose of the settlement. They also create natural checkpoints for financial education, goal-setting, and responsible decision-making, especially when a corporate trustee is involved to help guide the process.

A recent example illustrates how effective these provisions can be. One minor beneficiary’s trust included age-attainment language that allowed him to withdraw a set percentage of trust in five-year increments once he reached adulthood. As he approached the first milestone, the corporate trustee worked closely with him to understand his goals and help him think strategically about how to use his withdrawal rights. After he reached his first eligibility point, he chose to withdraw funds to purchase a rental property. A year later, he exercised another portion of his withdrawal right to pay for college tuition, allowing him to pursue his education without incurring debt.

This kind of structured flexibility is one of the strengths of age-attainment and withdrawal provisions. These strategies in trust planning can give beneficiaries room to grow into their financial lives while still protecting the core of the settlement. With a corporate trustee providing continuity, guidance, and administrative support, beneficiaries are better equipped to make decisions that reflect both their immediate needs and long-term goals.

Directed Trusts. Directed trusts promote a collaborative framework in which the trustee works alongside other professionals or powerholders, such as investment advisors or distribution advisors, who are authorized to direct specific fiduciary functions. This structure offers a level of flexibility that can be invaluable in complex situations involving sophisticated beneficiaries, particularly when their long-term objectives call for a more nuanced use of trust assets. It also permits a family’s other professional advisors to play a role in the administration or management of the trust.

Tennessee’s directed trust framework is codified in Tennessee Code § 35-15-710, which provides that when a “[t]rustee, trust advisor, or trust protector [is required] to follow the direction of a trust advisor, trust protector, or trustee, and the trustee, trust advisor, or trust protector acts in accordance with such direction, then the trustee, trust advisor, or trust protector so directed must be treated as an excluded fiduciary.” This is the statutory backbone that allows Tennessee trusts to bifurcate fiduciary responsibilities, as the trustee’s liability is limited so long as the trustee follows the directions of the directing party.

By way of example, certain beneficiaries may want to invest in Bitcoin, non-fungible tokens (NFTs), or other digital assets. By structuring the trust as directed with respect to investments, the appointed power holder can pursue investment strategies that reflect their interests and risk tolerance, while the corporate trustee continues to manage the administrative responsibilities of the trust.

When Should Plaintiff Attorneys Think About Trust Planning?

The earlier trust planning begins, the smoother the settlement process will be for both the attorney and their client. There are several scenarios that may trigger a conversation about trust planning:

• The client receives TennCare, SSI, or other means-tested benefits;
• The client has cognitive limitations, mental-health challenges, or addiction history;
• The client is a minor or young adult with limited financial experience;
• The settlement is large enough to create a spendthrift risk;
• The client will receive multiplate payment streams (such as lump sum and structured settlement payments); or,
• The family dynamic is strained or financially dependent on the client.

In these instances, considering trust planning early and perhaps involving a corporate trustee, can prevent rushed decisions during the settlement process, avoid benefit loss, and ensure the trust is drafted correctly before funds are disbursed.

Trust Planning as a Standard Part of Plaintiff Advocacy:

Ultimately, trust planning can be a core component of responsible representation for clients who are vulnerable or whose settlement calls for a complex structure that is guided by several professionals to ensure the funds are preserved. By incorporating trust planning into the settlement phase and partnering with a corporate trustee, plaintiff attorneys can protect their clients’ futures, reduce their own exposure, and ensure the settlement they fought for truly serves its intended purpose. When a trust is incorporated into the settlement structure, the settlement stops being a temporary resource and becomes a foundation for long-term stability, dignity, and security.