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When there are hundreds of thousands or even millions of dollars involved in a personal injury claim and lawsuit settlement, you will be faced with two payment options if your personal injury lawyer in Sudbury is successful in representing you. In catastrophic injury cases (spinal cord and traumatic brain injuries), the claim for accident benefits can be significant. After all, you injuries could involve millions of dollars in attendant as well as prolonged rehabilitative care.
Furthermore, the insurer is under no legal obligation to pay your accident benefits in a single lump sum. Let’s say you pass away in 5 or 6 years from the date of your accident. Why should that insurance company have to continue paying that settlement in the future when you obviously won’t be around to spend it? Conversely, a personal injury claim that is closed is advantageous for the insurer because they are no longer “on the hook” so to speak.
What is a Structured Settlement?
While the successful plaintiff may want a single lump sum payment, this may not be possible for the insurance company to comply with their wishes and the only option for payment is a “structured settlement.” You’re probably wondering what that means. In so many words, a structured settlement is similar to a guaranteed tax-free annuity. It is a way of paying for damages in a personal injury claim on a periodic basis for life or over a specified period of time.
In a personal injury structured settlement, it is often set up on an installment payment basis for a minimum of a 5-year period. As with any legally awarded or mandatory compensation in a personal injury case, these payments will be tax-free. However, if you generate financial gain such as capital gains, interest, or investment growth, you will have to pay tax on those amounts. Today, the structured settlement is becoming increasingly more popular among defendants, plaintiffs and the insurance companies.
Features of a Structured Settlement
Once you and your personal injury lawyer in Sudbury have agreed to the settlement offer, signed the agreement, and your case has been officially closed, it cannot be altered in any way by anybody. Furthermore, you can’t take advantage of any future investment opportunities or unplanned purchases by fully or partially cashing out your settlement. There are other features to be aware of.
For instance you can show proof of income by showing your payment schedule to a lender. However, those payments cannot be assigned, garnished, pledged, or redirected to the lender. Additionally, the interest rates on a structured settlement are usually fixed. So even if better rates become available in the future, you cannot benefit. Conversely, you are protected against falling interest rates.
Thus, it is important to think before you sign on the dotted lines as your future is at stake here. Ensure that you work with an experienced lawyer so that they can give you the right advice.