Making a Settlement Last: Advice for Attorneys, Legal Teams, and Clients

Lengthy hours are spent arriving at a settlement agreement or achieving a verdict. Most of the time, these monetary settlements are awarded to individuals and families who are not equipped to manage this sudden wealth. A financial disbursement can cause a range of reactions from immediate spending, extreme prudence, or depositing it in a personal bank account where it stays an indeterminate amount of time. Very few recipients are equipped to strategically manage a new settlement for the long-term.

As a settlement nears completion, financial conversations with a client are key. With larger settlements, the legal team should facilitate initial financial discussions to ensure a smooth transition into the next phase and safeguard the monetary compensation for current and future needs related to this injury.

Below are some guidelines for conversations that can assist clients in achieving these goals.

Conversation Openers

• “A large settlement is, in part, financial compensation to cover future expenses related to your injury. It’s not a windfall but affords monetary assistance for both current and future needs related to the injury.”
• “When receiving these funds, there will be a transition to a new way of thinking regarding this settlement, including how to safeguard your settlement and adjusting your long-term life plans.”
• “A settlement can make life decisions more complicated. Unfortunately, this injury adds to the complexity.”

Financial Topics to Explore as a Settlement is Finalizing:

• Settling slowly into a new norm before spending.
  • Life has been moving rapidly. Take time to reset.
  • Not everything is urgent. Wait on some decisions before taking action, as your opinions may shift dramatically with time.
• Prioritize what’s most important for now and in the future.
  • Make a list of tasks and goals and rank from most to least important.
  • Take time to reflect to decide if these priorities are accurate.
• Keep this new wealth on a need-to-know basis.
  • Individuals and family members may ask for an investment or personal assistance for their own needs.
  • Avoid promising until priorities are set and remind those who ask the purpose of the funds.
  • The settlement is for injury-related needs over the entire lifespan. Gifts will decrease the ability to meet these needs.
• Engage and learn from others with similar challenges.
  • Join groups where individuals are sharing first-hand their life experiences.
  • Look to your community for support and opportunities.
• Plan towards financial stability.
  • Be thoughtful and avoid making irreversible financial decisions; flexibility has value.
  • Distinguish between true needs and wants.
  • Allow future financial growth by letting funds grow for future days; cost and injury complications can increase with age.

Wealth Planning is a Necessity for Larger Settlements

An attorney’s conversations with their client shape the next steps of using the settlement effectively.  A client should aspire to make settlement funds last throughout multiple stages of their life.

At this point, partnering with a wealth manager who has settlement experience is strongly suggested. Expectations would include defining financial goals, directing in-depth planning discussions, and helping the client progress toward personal aspirations. In addition, an experienced wealth manager often seeks answers to the following questions to direct the financial plan.

• Will your health be stable throughout your life?
• Should you financially plan for injury complications to change over time?
• What government benefits exist to supplement your settlement, and do you qualify?
• How will inflation affect your budget over the years?
• How will you invest, save, or create opportunities for principal growth?

Wealth is complicated. The complication is intensified by adding a newly acquired injury. A wealth manager who understands disabilities and the financial implications are vital for the client’s long-term success in making their settlement last. Planning should include:

• Financial planning that provides for short and long-term objectives and future injury needs
• Risk management from many angles to help safeguard assets and grow funds more predictably
• Investment advisory to support cash flow needs and capital preservation
• Risk tolerance for investments and portfolio management
• Estate and tax planning, including wills, trusts, and tax implications
• Government benefits, caretaker liability, trust requirements, medical insurance

The stakes are high. An injury brings physical and emotional challenges, and adding wealth increases the complexity. Attorneys can begin initial conversations using these conversation openers and financial topics as the case nears resolution. Strongly consider including an educated wealth manager to support clients in their transition toward financial stability, pursuing financial peace of mind, and making the settlement last for the long term.

About the Authors: Coldstream Wealth Management offers comprehensive financial planning and customized investment portfolios. Coldstream’s Disability Advisory Services (DAS) combines experienced wealth management and disability advocacy with a trustworthy handoff to deliver better outcomes for clients and their attorneys. Learn more at www.coldstream.com/das.