If you’ve been involved in a serious accident that requires a large sum to be paid to compensate you for injuries, time lost at work, and pain and suffering, you will have a choice regarding how and when to receive your award. Your attorney will talk to you about the pros and cons of receiving either a lump sum payment or a structured settlement.
This article provides an overview of the two options. Donaghue & Labrum is available for a free consultation and to provide further insight into your options based on the circumstances of your personal injury case.
What is a Lump Sum Payment?
A lump sum payment is just what is sounds like. You will receive the entire amount of compensation that you are entitled to for your injuries all at once, in a lump sum. If you opt for a lump sum settlement, all of the money that you will receive from the defendant will be available to you upfront. This allows you complete control over the entire sum of your settlement as soon as the negotiations are complete.
What is a Structured Settlement?
A structured settlement is an arrangement that allows you to take monthly or annual payments on your settlement until the entire amount has been paid out to you. The term of the arrangement could even last for the rest of your life should you require ongoing care.
A structured settlement is often involved when the plaintiff has suffered a serious or catastrophic injury.
When a structured settlement is negotiated, the defendant will usually convey the payment to an insurance company or other entity that will be responsible for paying out the settlement according to the agreed-upon terms. This has the effect of protecting the plaintiff should the original responsible party go bankrupt.
Options for Structured Settlements
There are as many ways to structure a settlement as there are plaintiffs receiving them. You and your attorney will have tremendous flexibility when it comes to planning the terms of a structured settlement.
A plaintiff who has mounting medical bills or other major financial obligations can negotiate a structured settlement that pays a large amount upfront and splits the remaining settlement into monthly or yearly payments. Structured settlements can include contingencies, such as an allowance should there be future medical advances to treat the plaintiff’s condition that didn’t exist at the time of the settlement. You could arrange to begin the terms of the settlement with smaller payments and increase them later on during your retirement.
You could also do the reverse and start with higher payments and receive smaller installments later if you have investments that will pay out as you get older. You can even opt to defer the entire award until some point in the future. It really all depends on your current circumstances and your projections for your financial future.
Choosing Between a Structured Settlement and a Lump Sum Payment
Deciding whether to take a structured settlement or a lump sum payment once you’ve won or reached a settlement in your case will require in-depth discussions with your attorney and perhaps with a financial advisor. Here are some pros and cons to consider as you begin thinking through your options:
- Your present and future financial obligations: What are your major financial obligations? Do you have a mortgage? Minor children? College tuition payments? How long until you planned to retire? Do you live in a two-income home, or are you single? All of these considerations will help you and your attorney to decide how best to accept your award.
- Tax benefits: Most personal injury settlements are tax exempt, but a structured settlement may provide the opportunity for further tax benefits and may therefore be more valuable over the long term. An annuity payment and the interest earned on it may be completely tax free, which is not true of the interest on a lump sum that you will use to invest.
- Your financial discipline: If you receive a lump sum payout, would you be likely to spend it carelessly on luxuries or on items that are non-essential to your treatment and recovery? If so, taking a lump sum payment may be unwise.
- The complexity of your injuries: Will you require ongoing care for the rest of your life, or will you regain some or all of your pre-accident health and mobility? Your expected future medical requirements will factor into whether you opt for a structured settlement or a lump sum payment.
Honest, Successful Personal Injury Lawyers in Media, PA
When you’re trying to decide how to receive a settlement for a serious injury, it is not the time to take chances. The terms of your settlement should be handled by the most experienced and trusted personal injury law firm available. This is why our clients refer their friends and loved ones to Donaghue & Labrum. We have successfully helped thousands of clients win or settle their cases and receive aggressive awards that take care of their needs for the rest of their lives.
We know that every person and every case is different, and our vast experience with all types of personal injury claims gives us a wealth of experience to draw on. This enables us to give you the best possible guidance in choosing the right path.
If you or a loved one has been injured due to another’s negligence, call Donaghue & Labrum immediately. We are the Delaware Valley’s most trusted personal injury firm, and we are there with you every step of the way to ensure that justice is served.