Should You Accept A Structured Settlement?
Michael Babboni
Personal Injury
Most personal injury cases never reach trial. Instead, they are typically solved through a settlement. When you reach a settlement, you will be given two options of how to receive your compensation. The first is a lump-sum where you will receive all the damages you are owed in one single payment. The second is a structured settlement where you will receive payments over a period of time.
A question we are often asked after we negotiate a fair settlement is which payment plan we recommend. We believe that the payment plan depends on the specifics of the case. However, we believe in empowering our clients so they can make the best choice for themselves. Here is a pros and cons list of structured settlements, so you can decide which option is right for you:
Pros Of Structured Settlements:
● Structured settlements provide the certainty of a regular income. If your injuries are so severe that you cannot work, this steady income can make a huge difference in your life.
● In some cases, you may receive a larger settlement if you accept a structured settlement offer.
● Under US tax laws, in most cases personal injury settlements are “tax free” with the exceptions of instances of punitive damages and interest that accrues on a settlement. In most cases accepting a structured settlement can provide a tax benefit.
● Structured settlements usually include unforeseeable future events and contingencies. For example if there is a medical breakthrough in the type of injury, that can increase the structured settlement amount depending on the details of the settlement. A qualified personal injury attorney can help include these clauses.
● Structured settlements negotiations are often resolved faster than lump sum
● Structured settlement payments are protected under Florida law. So you don’t have to ever worry about not receiving payment if the insurance company goes out of business.
● You can always convert your structured settlement into a lump sum in the future.
Cons Of Structured Settlements:
● You will only have access to some of the payment you are owed. This can be challenging when facing large bills, debt, and expenses. If you need more more from your settlement to avoid economic hardship you will either have to take a loan or pay a fee to access the future funds.
● Structured settlements are subject to economic fluctuations like inflation. What may be a fair amount now, may not have the same financial value in five years.
● Lump sum settlements can be invested into other accounts with a high rate of return. With the right financial planning, you may be able to receive more money overtime from a properly invested lump sum settlement.
Another important thing to consider is that you can receive a combination of a lump sum and a structured settlement. This is a great option in cases where an injury has caused immediate financial burdens. You can use the lump sum to pay off debts and expensive medical bills, then use the structured settlement to continue to pay for further treatment and lost income.
Furthermore, structured settlements often cost insurance companies less, so often they will push for structured settlements even though a lump sum may be a better option. Fortunately, under Florida law, they have to disclose their costs. This is why it is important in any settlement negotiation to work with a qualified personal attorney. A good injury attorney will look at the settlement offers and the disclosure and determine if you are being pushed into a structured settlement to save the insurance company money or if it’s the best option for you.
To learn more about the settlement process, contact The St. Peter’s Lawyer Michael Babboni. Michael has years of experience negotiating settlements and will help you figure out which option is right for you.