Why Use a Settlement Management Trust?

The ideal candidate for a Settlement Management Trust (SMT) is an individual who needs an independent third-party trustee to protect his/her interests. The purpose of a SMT is to protect individuals who may be vulnerable to financial abuse or lack the ability to spend funds in accordance with their best interests. The Trustee of a SMT screens disbursements to ensure that they make fiduciary sense. The individual may be vulnerable and may or may not be disabled.

General Rules of a SMT

As Trustee, CPT Institute follows three general guidelines when administering a Settlement Management Trust:


1. As Trustee, CPT Institute has a fiduciary duty to the Trust Beneficiary - A fiduciary duty is the highest standard one person can owe another under the law. By definition, this means CPT Institute is required to act in the best interests of the Trust Beneficiary.


2. All disbursements from the SMT must have a direct benefit to the Trust Beneficiary - Funds placed in a SMT must be used for the Trust Beneficiary's primary benefit. Some examples include, but are not limited to, products or services related to the Trust Beneficiary's health, education, maintenance, or support. In the event that the Trust Beneficiary of a SMT is a minor, a parent has a duty to provide for his/her child in a manner that is consistent with his/her own standard of living when requesting disbursements related to shelter, food, and utilities (some exceptions apply).


3. All disbursement requests from the SMT require receipts and/or invoices to process - A Trustee is legally required to keep accurate records and a detailed history of all disbursements.

Should I Use a SMT?

A Settlement Management Trust can be an excellent tool to protect individuals who need financial protection from others or from themselves. A SMT can be used when an individual already has some form of health insurance, but needs a low cost non-profit trustee for fiduciary oversight. As Trustee, CPT Institute will ensure that all disbursements from the trust are in the best interests of the Trust Beneficiary.

Outside a Special Needs Trust, a SMT does not protect government benefits such as Supplemental Security Income (SSI) and/or Medicaid. However, the SMT has "springing powers" (sometimes referred to as "trigger powers") to become a Special Needs Trust if a Trust Beneficiary becomes eligible for SSI and/or Medicaid benefits.

Disclaimer: This resource provided by CPT Institute is for informational purposes only and arc intended to be used as a non-legal guide prior to consultation with an attorney familiar with your specific legal situation. CPT Institute is not engaged in the practice of law or in rendering legal advice or counsel. No such legal advice or counseling is either expressly or impliedly intended. If you require legal advice, you should seek the services of an attorney. © 2021 CPT Institute All rights reserved.