In our blog we will try to provide you with general information regarding car accidents, motorcycle crashes, and personal injury cases, as well as updates in important cases and statutes dealing with family law in New Hampshire. This is not to be construed as legal advice. Every case is unique and small facts can make a difference.
Is a Structured Settlement the Right Option For Me?
Most settlements in personal injury lawsuits are made in one lump sum payment. A lump sum payment is defined as a one time payment made to the plaintiff in the case by the defendant (or the defendant’s insurance provider). The payment officially settles the case. However, in certain cases, a plaintiff forgoes a lump sum payment in favor of having their compensation meted out through a structured settlement. With a structured settlement, all or part of a plaintiff’s settlement is paid out to them over a period of years. A portion of the settlement is paid to the plaintiff and their legal counsel immediately after the case concludes, and this remaining amount is structured out over a predetermined time period. Structured settlements can even involve lifetime payments.
How Does It Work?
If a plaintiff and a defendant agree upon a structured settlement, the defendant (or their insurance provider) will transfer a percentage of the settlement that will be structured to a different type of insurer. In most cases, this will be a life insurance company who specializes in handling this type of settlement. It is imperative to ensure that the company you select to handle your structured settlement is highly rated. If the business were to declare bankruptcy or otherwise fail, then your settlement will disappear. For this reason, there is a slight element of risk attached to structured settlements.
Most aspects of a structured settlement are negotiable, including the following:
§ How often you wish to receive your payments
§ The lifespan of the structure
§ How much money you’d like for each payment to contain
§ Whether or not you wish for a lump sum payment at the end
§ Whether or not you want payments to continue to your heirs should you pass away before the structure is up
Advantages of a Structured Settlement
The single lump sum method is the traditional method for settling personal injury cases. The defendant issues you a check. You cash the check. The case is closed. All small settlements and most medium sized settlements (those less than $150,000.00 in value) should, ideally, be paid through a lump sum.
However, if you are attempting to settle a larger case, there are two primary reasons why a structured settlement might be beneficial:
1. First and foremost, a structured settlement ensures that the money will not be spent too quickly. Unfortunately, many plaintiffs who receive large, sudden windfalls spend all of the funds in a shockingly short amount of time. Within 2-4 years, there is nothing left.
2. Secondly, the structured settlement method will save money on your taxes. Generally, the money that you receive in a personal injury lawsuit settlement is not taxable; however, you are required to pay money on the dividends and interest that you earn on settlement money after it has been invested. This can result in a significant tax payment each year. With a structured settlement, there is considerably less money sitting in your bank account, and your tax obligations are much lower.
Advantages of a Lump Sum Settlement
The primary advantage of a lump sum settlement is that it enables you to receive your money right away. If you need to pay off medical bills or bills related to your settlement, this is an ideal arrangement. If you plan to purchase a new car or home or start a business, then you need the money quickly. If the settlement is not that significant, then a structured settlement will not offer any real advantage.
Discuss with your New Hampshire personal injury lawyer whether or not accepting a structured settlement would be advantageous for you. Being familiar with the unique aspects of your case will enable your lawyer to advise you regarding the best course of action.
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This site does not constitute legal advice. An attorney client relationship is formed only after an agreement is entered into between an Attorney of Liberty Legal and a client is reached. Past results do not guarantee future results.
Disclaimer: Some cases are referred to other law firms with consent of client.
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