Protection of Personal Injury Proceeds in Virginia
One of the unique provisions under Virginia law is the statutory protection of personal injury and wrongful death proceeds against creditors. Specifically, the Virginia Code states that, subject to a few specific exceptions, “all causes of action for personal injury or wrongful death and the proceeds derived from court award or settlement shall be exempt from creditor process against the injured person or statutory beneficiary.” The creditor process has been defined under the law as “all methods used by creditors to collect unsecured debts,” therefore, the courts have determined that the law protects the proceeds from unsecured, but not secured, creditors. The exemption may also apply to property purchased with the proceeds of the personal injury action, but the proceeds, and the purchases derived from such proceeds, may lose their exemption if commingled with other assets.
To protect against the commingling of assets, I often work with personal injury claimants to develop a Settlement Protection Trust that will hold the proceeds from any settlement or award received from the underlying cause of action. I frequently incorporate provisions to outline the source of funds, thereby creating a clear delineation between the claimant’s personal injury proceeds and their other assets. This protects the assets in the trust from current and future creditors, even in a Bankruptcy proceeding.
While creditor protection is one of the greatest benefits afforded by a Settlement Protection Trust created in Virginia, another advantage is that the trust will provide general asset protection. The average settlement lasts only three years, regardless of the size of the settlement. This is often the result of frivolous spending due to poor money management or pressure from outside influences. The utilization of a professional trustee helps reduce the overspending of assets through development of an appropriate budget, while also providing professional investment strategies, thereby prolonging growth and availability to the beneficiary.
While the idea of a trust can be overwhelming, the good news is a Settlement Protection Trust can be very flexible in its terms and can easily satisfy a client’s long-term objectives. As a result, they can benefit most personal injury claimants, especially in Virginia as a result of our unique creditor protection statute.
Ask Neo: A Bear in the Winter?
Hook Law Center: Neo, we recently traveled and were surprised when we came across a grizzly bear because we thought bears hibernated in the winter. What information can you provide about this oddity?
Neo: When the weather becomes too cold for an animal, they may enter an inactive state, known as hibernation. Only four species of bears hibernate – the American Black Bear, Asiatic Black Bear, the Brown Bear, and Polar Bears. Although we often think of bears hibernating, they actually do not hibernate in the traditional sense of hibernation because their body temperature only drops a little bit and they can awaken at any moment; however, like true hibernators, the bear’s heartbeat will slow down and they can go for a long time without having any food.