Personal Injury Cases and Structured Settlements
Parties to personal injury cases often opt to settle out of court instead of going to court, and these settlements are usually paid all at once. The alternative to a lump sum payment is a structured settlement where the plaintiff receives the payments over an agreed length of time. With a structured settlement, a portion of the settlement is paid out instantly while the remainder is transferred to a different insurer, preferably one that specializes in the management of structured settlements.
How a personal injury structured settlement works
When the plaintiff requests for or acquiesces to a structured settlement spread over a certain length of time, the defendant or his insurer transfers the portion of the settlement meant for structuring to a separate insurer. The different insurer is preferably one that deals with the management of structured settlements.
The structured settlement provides periodic payments over a length of time that are exempt from taxation and are designed to supply the necessities of personal injury victims. In case you want to increase your settlement funds, you can invest in interest-earning annuities which can be purchased by insurers.
It is very prudent for the personal injury plaintiff to seek the counsel of a structured settlement consultant to streamline the details of the payments and craft a structure that aligns well with the plaintiff’s best interests.
You may negotiate the structured settlement terms so as to receive the payments either for a definite period or the remainder of your lifetime and this in either increasing or consistent amounts of cash.
Come to think of it, virtually everything about the structured settlement can be negotiated, for example:
- The structure’s length
- Payment intervals
- Whether the structured payments should devolve to heirs after the death of the plaintiff or they should end upon the passing of the plaintiff.
Structured Settlement or Lump Sum Settlement
You may receive either a lump sum payment or structured settlement for your personal injury case. In a lump sum settlement, the defendant or his insurance company issues a single payment to you. Getting a lump sum payment is enticing, especially when you urgently need the money right away- for example, to settle medical or legal bills, buy a house, invest in business, pay college fees, etc.
However, when vast sums of money are involved, it is always prudent to opt for a structured settlement. There is a host of reasons why a structured settlement is an ideal option.
First off, a structured settlement ensures that you do not unthinkingly blow through the money. It is unfortunate that many personal injury victims who receive huge windfalls often squander the money in a shockingly short span of time- usually in two years- and have nothing left after that. The second reason is that a structured settlement relieves you of onerous tax obligations. You might be aware that you are required to file taxes on interests and dividends you get from the settlement money once you invest it, but if the settlement money is structured or spread over a defined length of time, then it is exempt from tax.
How to Decide on a Proper Settlement and Value in a Personal Injury Case
The award of the settlement money isn’t intended to reinstate you to your former health or put you in a better financial position. Rather, it is calculated to provide you with resources to reimburse yourself for out-of-pocket expenses- medical, legal, loss of income, etc. - that might have accrued as a result of the accident. Therefore, it is vital to explore all the payment options and explore all factors related to your settlement before acquiescing to any compensation award. It is important to consider these factors when deciding on the settlement value:
- Length of medical treatment
- Lost income
- Medical bills accumulated
- Post-accident treatment
- Need for a long-term diagnosis
- Pain and suffering damages
Selling a Structured Settlement
Some folks opt to sell their structured settlement instead of waiting for payments to trickle in over time. Getting cash for structured settlement is an ideal option only if you have lost your job, are encumbered with unexpected bills, or the mortgage payments have unexpectedly increased. However, before you sell the structured settlement, it is prudent to receive a quote before you accept your contract offer.