There are two situations in which Settlement Preservation Trusts are usually advisable.
 Minor or Incapacitated Person
In New Jersey, if a minor receives a settlement, it must be held by the court until the minor attains majority. Upon the child’s attaining age 18, he can present himself at the court and say, “Wish me a Happy Birthday, and please give me my check for $1 million.” Alternatively, the court can be asked to establish a Settlement Preservation Trust to hold the assets for the minor. Most individuals do not have sufficient maturity to handle significant financial assets at age 18, and the trust can be designed to continue until the child is older. Depending on the size of the settlement, distributions can be provided at age 30, 35, or even 40. In the meantime, the trust provides for distributions for the beneficiary’s health, education, maintenance, and support. The trustee can even be authorized to make distributions for the beneficiary to buy a home or start a business.
In the case of an incapacitated person, a settlement preservation trust is also usually more appropriate than holding the funds in an account with the court. Distributions can be made by the trustee without seeking court approval.
The settlement preservation trust also usually results in better money management of the settlement funds than would be available through the funds being deposited in court. Some judges are reluctant to establish a settlement preservation trust for a minor going beyond age 18, and in some instances the judge can be satisfied by including a provision that gives the beneficiary a 30-day window to withdraw funds upon attaining age 18.
 Protection Against Exploitation
A Settlement Preservation Trust is designed primarily to protect the beneficiary from exploitation. Many people with disabilities have low self-esteem and try to buy friendship from others. For example, there may be a bad boyfriend or even relatives, friends, or acquaintances that are ready to exploit the suddenly wealthy plaintiff. The settlement can quickly be squandered if an unscrupulous person enters the life of the beneficiary. In other situations, an injured plaintiff may suffer from excruciating pain and may take strong doses of pain medication that impair judgment. Again, an unscrupulous person can take advantage.
 Characteristics of a Settlement Preservation Trust
The Settlement Preservation Trust is an irrevocable trust, generally administered by a corporate trustee or family members serving as Trust Protectors. The trust can be funded in whole or in part with a structured settlement and the trust document could contain a provision prohibiting the sale of the income stream from the structured settlement. A good practice is to have the settlement preservation trust established by the court.
 Settlement Preservation Trust with Special Needs Provisions
In many instances, a beneficiary may be seriously injured, but not yet in need of SSI or Medicaid. The client may need those benefits in the future. A strategy to be considered in those situations is a settlement preservation trust with special needs provisions. The document contains two subtrusts. The first subtrust is the special needs trust, which is essentially a support trust, and this subtrust is initially funded. If the beneficiary becomes disabled and requires public benefits at some time in the future, the trustee is authorized to transfer the funds from the settlement preservation subtrust to a special needs subtrust, so that the beneficiary is able to obtain means-tested public benefits in the future.