Should You Accept A Structured Settlement For Your Personal Injury Claim?
Here in the state of Florida, when someone is injured by another person’s negligence – and can prove it – with the help of a Stuart personal injury lawyer, you can get compensation for all related medical expenses, lost wages, pain and suffering, and more.
If you are awarded compensation after sustaining a personal injury or injuries, is it best to be paid in a lump sum or through a structured settlement plan?
Most personal injury compensation payments in Florida are made in a single lump sum, but some injury victims prefer to receive their compensation payments in installments over time.
PRECISELY WHAT IS A “STRUCTURED” SETTLEMENT?
Generally speaking, if you’ve been injured by another person’s negligence in this state, you will want to receive your compensation in a lump sum, but there will be some narrow circumstances where a structured payment might be preferable.
A structured settlement means that compensation payments are scheduled over a period of years. Should you accept a structured settlement as compensation to resolve a personal injury claim?
Stuart personal injury attorney Jordan R. Wagner says, “It obviously depends on a case by case basis. Generally, my answer is no. However, I do recommend them in the case of minor children and when a client will net in excess of at least $500,000 – more practically, $1 million.”
“In the case of minor children, I recommend it as a minor child cannot receive their settlement funds until they’re 18.”
Attorney Wagner explains, “Although this would require parental and court approval, I think it’s best for a child to not get a windfall when they turn 18. Much better if they are paid over time to ensure the money is used wisely.”
DO STRUCTURED SETTLEMENTS ACCOUNT FOR ATTORNEY’S FEES?
The attorney’s fee in a personal injury case is paid from whatever compensation is recovered, so the first payment in a structured payment plan may be larger than subsequent payments in order to expedite payment of the attorney’s fee.
Some structured settlement arrangements may even involve payments for life. Keep reading to find out more.
HOW DO STRUCTURED SETTLEMENTS WORK?
If the plaintiff and defendant in a personal injury case agree to a structured payment arrangement, the compensation funds are usually transferred to a life insurance firm that routinely handles structured settlements.
If this is what happens in your own case, make certain that the life insurance company is reputable, respected, and rated highly. If this company fails or goes bankrupt, your settlement funds could disappear.
That places a very minimal risk element into every structured settlement.
Like nearly everything else in a personal injury case, the conditions and terms of structured settlements may be negotiated, including:
1. how often payments will be made, and for how long
2. how much each payment amounts to
3. whether payments cease or transfer to your heirs if you pass away
HOW IS A STRUCTURED SETTLEMENT AMOUNT CALCULATED?
How are structured settlements arranged? Here’s an example: Let’s imagine that you are awarded $2 million in a personal injury settlement after suffering catastrophic injuries in a south Florida automobile accident.
You prefer to be paid $100,000 a year, and you prefer for your spouse to receive the payments if you pass away within the twenty-year time frame.
You and your spouse will be eventually receiving $2 million, but the defendant in the case (or the defendant’s insurance company) will actually pay substantially less than $2 million to fund the arrangement.
EXACTLY HOW IS A STRUCTURED SETTLEMENT PAID?
Structured settlements are considered “future income streams.” Future income streams are calculated according to their current value as if the whole amount was in a checking account today.
How much does the insurer need today to pay $100,000 a year for twenty years? Because money earns interest, the amount needed will be substantially below $2 million.
Successful personal injury plaintiffs should understand that this is a complicated calculation. Your personal injury lawyer may retain a financial expert to determine what will be needed.
ARE THERE ADVANTAGES TO TAKING PAYMENTS OVER TIME?
As mentioned previously, personal injury cases here in Florida are usually resolved with lump sum payments. When you cash your compensation check, the legal and financial aspects of the case are concluded.
In most cases, personal injury plaintiffs should insist on a lump sum payment for any amount less than about $500,000.
Stuart personal injury attorney Jordan R. Wagner advises against structured settlements for lesser amounts. “I do not recommend it for smaller settlements as the structured settlements offered for those lower sums do not typically make sense from a personal or financial perspective.”
But for larger amounts, a structured settlement plan may offer several advantages.
For starters, the structured arrangement ensures that you won’t “blow” or lose your entire compensation amount. Far too many victims of personal injury fail to manage their new wealth properly, and in just two or three years, they’re broke or even in serious debt trouble.
Attorney Wagner says, “By getting paid out over time, the injured person can be assured they will always get paid on a monthly or annual basis to cover their future medical care and treatment.”
Secondly, a structured settlement arrangement helps you save on taxes. While a principal personal injury payment usually is not taxable, taxes will be owed on any dividends and interest you receive after the principal is invested.
A structured settlement doesn’t allow all of your compensation to sit in your bank at once, so you’ll have far less to pay each year in taxes on any dividends and interest.
WHAT ARE THE ADVANTAGES TO RECEIVING A LUMP SUM?
The main advantage of receiving a lump sum is simple: You get all of your money at once, and the matter is done with. Moreover, most personal injury defendants will have creditors waiting to be paid in full, and a lump sum lets them do that.
If you plan to buy a home or launch a new business with your compensation, you will probably need all of it at once. And obviously, if your compensation amount is modest, there’s no real advantage to waiting for future payments if your compensation is available now.
Discuss your options with your personal injury lawyer. In most personal injury cases, you will want to insist on a lump sum payment. But if the settlement is large, you may want to discuss with your attorney the advantages and disadvantages of both types of payments.
WHAT WILL A PERSONAL INJURY LAWYER DO ON YOUR BEHALF?
If you have been injured by another person’s negligence in South Florida – in a vehicle crash or in any other kind of accident scenario – seek medical attention at once, and then take your case directly to a qualified Florida personal injury lawyer.
It’s not always easy to prove that you’ve been injured by someone who was negligent, but an experienced personal injury attorney will review the details of your case, protect your rights, and fight aggressively for the compensation and justice that an injury victim deserves.
If you have to decide between a lump sum compensation payment and a structured settlement arrangement, it means that your personal injury claim has prevailed and that your attorney has recovered compensation on your behalf.
That comes at the end of a long legal process, and you’ll want an attorney’s guidance through every stage of that process.
Get the legal help that you need if you’ve been injured by negligence in Florida – as soon as you need it. Your health and your future could hang in the balance.