If you’ve been hurt due to someone else’s actions or negligence, getting a personal injury settlement can bring much-needed financial relief. However, many people are unsure how these settlements actually get paid out.
Understanding the process can help ease concerns and set expectations for how compensation is delivered. How payments are processed usually depends on the terms of the settlement, what type of damages were awarded, and whether it’s a lump sum payment or structured installments.
This is where the experienced professionals at Curcio Law can help.
Lump-Sum Settlements
A lump-sum settlement is the most straightforward way to receive compensation.
With this method, the defendant (or their insurance company) issues one payment that covers the entire amount of the agreed-upon settlement. This allows the recipient to access the full amount immediately, which can be particularly helpful for covering medical bills, legal fees, and other expenses related to the injury.
Once a settlement agreement is finalized, the payment process starts. The funds are typically sent to the plaintiff’s attorney, any legal fees, court costs, and liens are subtracted, then the remaining balance is forwarded to the client. This process may seem simple, but it often takes several weeks for the payment to be fully processed, especially if there’s additional paperwork or approvals needed.
While lump-sum payments offer greater flexibility, recipients must plan carefully to ensure the funds last as long as they’ll need them. Financial advisors will often suggest investing portions of a settlement to secure more long-term financial stability.
Structured Settlements
In contrast to lump-sum payouts, structured settlements provide compensation through a series of payments over time.
These payments are often arranged monthly, quarterly, or on an annual basis, based on the specifics of the settlement agreement. Structured settlements are often used in cases that involve minors or in catastrophic injuries, as long-term financial support may be required.
The primary benefit of structured settlements is their ability to provide consistent income, reducing the risk of spending the funds too quickly. Payments may also be customized to increase over time to account for inflation or anticipated future expenses, such as ongoing medical care.
Structured settlements are often funded through annuities purchased by the defendant. These annuities, which guarantee regular payments based on an agreed-upon schedule, offer security and predictability. However, you should be aware that structured settlements generally can’t be reversed, meaning they cannot be changed into a lump sum payment later.
Deductions and Liens on Settlements
Before receiving a settlement payout, plaintiffs must account for deductions and liens that may reduce the final amount. Legal fees typically represent a percentage of the settlement, as most personal injury attorneys work on a contingency basis. This means their payment is deducted from the settlement once the case is resolved.
Medical liens are also common in these cases, as medical providers or insurance companies can place a lien on the settlement to recover their fees for treatments that were provided while the case was pending. Your lawyer may negotiate on these liens to reduce the amount owed, ensuring that you retain as much of your settlement as possible.
In addition to legal fees and medical costs, unpaid child support or government liens may also affect the payout. Plaintiffs should work closely with their attorneys to identify and resolve any outstanding claims before the settlement is disbursed.
Settlement Payments and Taxes
Many personal injury settlements are not subject to federal or state income taxes, particularly when compensation covers physical injuries, medical expenses, and pain and suffering. However, exceptions may apply.
You should consult a tax professional to make sure that you’re in compliance with tax laws and if any portion of your settlement is taxable. Professional tax planning can you help avoid unexpected costs and preserve your settlement’s value.
Payment Timelines and Delays
The timeline for receiving a settlement payment may vary based on the complexity of the case and the terms of the agreement. Once settlement documents are signed by both parties, the defendant or their insurer is typically given a set period (often 30 to 60 days) to send payment.
However, delays can happen if additional approvals are required, especially in cases that involve government agencies or large companies.
You can also help prevent delays by promptly providing any requested information and ensuring all legal requirements are met. Attorneys play a vital role in streamlining and speeding up the process by staying in contact with all responsible parties and dealing with any issues that may arise.
At Curcio Law, we understand how personal injury settlements provide life-saving financial support to those recovering from accidents and trying to rebuild their lives. Understanding how these payments are structured, processed, and taxed can help you to make more informed decisions about managing your compensation.
Whether you choose a lump sum or a structured settlement plan, working with experienced legal and financial professionals can be vital in maximizing your settlement’s value and ensuring long-term stability.
Careful planning can turn a settlement into a foundation for recovery and future security.
We’re here to help you do that.
