Most personal injury settlements are paid as a lump sum. However, it’s good to consider all your options when wrapping up a claim. The personal injury attorneys at Thomas, Conrad & Conrad understand that lump sum settlements aren’t for everyone and believe it’s important to ensure our clients understand the payment options that may be available to them. Learning more about structured settlements can help you make an informed, financially sound decision.
What Is A Structured Settlement?
A structured settlement is an arrangement in which all or part of an award for a personal injury claim is paid over a period of years. Often, a portion of a structured settlement is paid to the plaintiff and their attorney when a claim is settled and the rest of is paid out over time. In some cases, structured settlement payments span many years and continue throughout a person’s lifetime.
How Does a Structured Settlement Work?
If you’re considering a structured settlement, it’s critical to know how it works. Typically, the insurance company that handled the defendant’s claim transfers the amount to be structured to a different insurer. Many life insurance companies specialize in managing structured settlements. It is vital to make sure the company that’s going to pay you is reputable and stable because there is a bit of risk involved. If the company declares bankruptcy or goes out of business, your structured settlement goes with it.
Your lawyer can help you negotiate the terms of a structured settlement. Some things you may negotiate include:
- How many years the structure term will be
- How often you want to get payments, whether it’s once a month, yearly, or even every six months
- The dollar amount of each payment
- Whether you’d prefer a lump sum payment at the end of the structure term
- Whether you want payments to stop if you pass away, or if they should continue being paid to your heirs
Advantages And Disadvantages Of Structured Settlements
Structured settlements are usually best for managing large amounts of money. If you receive an award that’s less than $150,000, it’s probably best to take a lump sum. If your case involves larger amounts of money, a structured settlement can help to ensure you don’t spend the money too fast. In addition, a structured settlement can help prevent people from taking advantage of injured victims who may be too generous with their funds. It is also a good way to ensure a settlement awarded to a minor child is properly spent and preserved.
A structured settlement can also help you save money on taxes. Even though funds received from a personal injury settlement typically aren’t taxable, you will pay taxes on the interest and dividends you receive if you decide to invest the money. With a structured settlement, the money is not taxable.
Of course, one of the disadvantages of a structured settlement is that you don’t receive all of the money at once. As mentioned above, when you opt for a structured settlement you are assuming an amount of risk you wouldn’t have with a lump sum. Funds are not immediately accessible in case of an emergency and dipping into your structured settlement funds will cost you. If you withdraw funds before age 59½ you pay fees and IRS penalties.
Calculating A Structured Settlement
Calculating a structured settlement amount is a complex financial task. Lawyers often consult with economists or other financial professionals to calculate an accurate value. It’s critical to have a lawyer review any contract before you sign it. Once a signed agreement is in place, there’s little you can do to change it.
Discuss Your Options With Your Attorney
By the time your personal injury claim is settled, you and your lawyer will most likely know each other well. Sit down and talk to them about your concerns and ask any questions specific to your financial and personal situation. A good personal injury attorney will have your best interests at heart and can provide perspective on issues you may not have considered.
Contact A Personal Injury Lawyer
If you’ve been hurt or have lost a loved one in an accident, our personal injury attorneys at Thomas, Conrad & Conrad can help. Our compassionate, knowledgeable team has more than 30 years of experience serving clients throughout eastern Pennsylvania. To schedule a free consultation, contact us online or call our Bath office at 610-867-2900. We also have three convenient locations in Allentown, Bath and Topton, Pennsylvania.