Structured Settlements 4Real®Blog 2026

by John Darer CLU ChFC MSSC CeFT RSP CLTC

A Special Needs trust (SNT) is a legal arrangement that allows families to provide financial support for a person with disabilities without jeopardizing their eligibility for government benefits like SSI and Medicaid.

The following piece of advice appears on an otherwise informative website of a Coral Springs* Florida elder law attorney:

“The issue of whether or not a minor or disabled individual will need public benefits must be determined prior to the issue of accepting the offer of the structured settlement. The determination of whether it is necessary for the structured settlement to be purchased by a Special Needs Trust must be made after considering all the factors involved“ Alice Reiter Feld Board Certified Elder Law Attorney, Florida and New York Bars, Beyond the Recovery Personal Injury Lawyer’s Guide to Presenting the Minor or Disabled Client January 2006

Neither Special Needs Trusts, nor Supplemental Needs Trusts, can Purchase Structured Settlement Annuities

Structured settlement annuities are most often purchased by a qualified assignment company as a qualified funding asset per IRC 130(d)

One hopes that this is an oversight on the part of Ms. Reiter Feld and that this inaccurate aspect of the advice is not being given to clients, because a Special Needs Trust CANNOT purchase a structured settlement annuity.   I do agree however, that “all factors involved must be considered prior to…”.

Later on Ms. Reiter Feld states “Structures also provide significant tax advantages because the payments are not taxed”. 

Comment: Structured settlements payments are income tax free, with the tax exclusion tied to the type of damages that the payments represent. But payments are not completely tax free for all circumstances as implied. 

Reiter-Feld: “Structures can have a devastating effect on eligibility for public benefits. If public benefits are a concern, the annuity should be paid into a supplemental needs trust”.

Comments:

• YES. Cash in hand can also have a devastating effect on eligibility for public benefits.
• A structured settlement is an option that can be used as part of case resolution.
• It is a tool that has a number of advantages such as the income tax exclusion and the contractual guarantees.
• A structured settlement can be paid into supplemental needs or special needs trust. if the needs of the payee demand.
• A commutation rider can be incorpprated (mandatory in some juridictions) to provide liquidity in the even of death of measuring life to help pay of Medicaid lien.

Reiter-Feld: “Structures do not provide funds for large capital purchases, such as house, a medical expense that is uncovered by insurance, or a wheelchair van. In the case of large structures, they can create tax problems if the beneficiary dies while there are still large sums of to be paid out to heirs.”

Comments:

1. A structured settlement DOES NOT provide for these things, a well crafted settlement financial plan DOES. A structured settlement may be part of that well crafted settlement plan. A settlement plan that contemplates the types of expenditures that Ms. Reiter-Feld states, can use a structured settlement IF the amount and timing of payments is known or can be approximated. For example, if a life care plan has been created then the payments can be tailored to match the known elements of the life care plan. Alternatively, in cases where there is a high rated age, the structured annuity can be used as an “insurance backstop” with a deferred start date. In either of such cases a sufficient amount of cash could (and should) also be allocated up front and apart from the structured settlement to cover the unanticipated expense, or the unanticipated occurrence of such expense;
2. With respect to death and a large structure, the “tax problems” that Ms. Reiter-Feld appears to have referred to are the estate taxes that would be due on the present value of the remaining guaranteed periodic payments at the annuitant’s death. “Large” has not been defined by Ms. Reiter-Feld, but of course we all know that there is an estate tax exemption. Clearly the estate tax equation is NOT limited to the present value of the remaining guaranteed structured settlement payments. The life contingent portion of the payments cease on the annuitant’s death so they are not really the issue. Proper crafting at the time of creation of the structured settlement, in anticipation of the need for estate liquidity, will usually include a death contingent commutation rider which would serve to commute (to a  lump sum) a percentage of the present value of the remaining guaranteed periodic payments. This would certainly provide liquidity for estate tax purposes OR to help pay of the Medicaid lien of the SNT at the beneficiary’s death, if needed. The income tax benefits would be unchanged.
3. If the structured settlement was paid into a special needs or supplemental need trust, the Medicaid lien would of course have to be paid off, before the heirs got any. The lien would need to be paid off whether or not there was a structure.If there were no other assets in the SNT then the balance would have to come from the structured settlement death commutation.

Related Reading

Estate Taxes and Structured Settlements – Structured Settlements 4Real®Blog  August 1, 2006

Atty and CPA Get “Incomplete” for Estate Tax Article on Structured Settlements – Structured Settlements 4Real® Blog  August 25, 2006

Structured Settlement Commutation Riders Explained (4structures.com)

Special Needs Trust Funded with Structured Settlements: Yes/No? (4structures.com)

What is Settlement Planning? Settlement Advisors and Financial Transitionists (4structures.com)

Special Needs Trust by State | Free 50-State Guide (2026)

This author welcomes the opportunity to visit with any elder law attorneys who seek an information sharing relationship with a competent and experienced structured settlement and settlement planning professional.

*at time of publication of the cited blog post, Ms. Reiter Feld’s offices were listed as located in Tamarac and Delray Beach. This 2006 archived page lists only the Tamarac and Delray Beach offices. The Coral Springs office—later located at 10101 W Sample Road—does not appear in Wayback captures of florida-elderlaw.com until several years afterward, indicating it was opened after this blog was originally published