The Difference Between Structured Settlements and Lump-Sum Settlements in Personal Injury Cases

Calculating Personal Injury Compensations

You must negotiate the specifics of how you will be compensated for your personal injury accident in order to reach a fair settlement. There’s a chance you’ll receive all of your settlements at once. Lump-sum payments are one-time payments. You may also have the option of being paid in installments over time. Such a settlement is known as a structured settlement.

There are advantages and disadvantages to each method of settlement, and what is right for you is based on your personal circumstances. To find out which option is best for you, talk to your personal injury lawyer. Find out if structured settlements are better than lump-sum settlements for California injury cases.

How Does A Structured Settlement Work?

When you get your injury payout in smaller, recurring installments rather than one large sum, it is known as a structured settlement. The settlement funds are distributed over a longer period of time rather than immediately following the settlement. The frequency with which you are paid and the amount of each installment may differ under a structured settlement. It’s possible that you’ll be paid for years to come.

You can create whatever terms you want while negotiating a structured settlement. You may request a big payment upfront to cover previous medical expenditures and bills incurred as a result of lost work. If you expect your medical bills to decrease over time, you may want to make larger upfront payments.

On the other hand, you might want your payments to rise over time to account for rising medical costs as you get older or rising child-care costs. You have complete control over the terms of your structured settlement.

What is the Structured Settlement Process?

If you reach a structured settlement, the reward money is often managed by a third-party insurance firm. The person responsible figures out how much they’ll have to pay to cover the compensation costs. It’s a difficult calculation. Because the money can grow over time as a result of investments, the responsible party usually pays in a smaller amount than you receive in installments. Consider the following terms when planning your structured settlement:

  • The total amount of payments
  • The frequency with which payments are made
  • In years, for example, how long do you want to receive payments?
  • Is there a greater payment due upfront?
  • If the total payment will be higher at the end
  • Whether or not the payments rise or fall with time
  • If payments end when the receiver dies or if they continue for a defined period of time

How Can Structured Injury Settlements Benefit You?

  • Spending the money too quickly is not a risk
  • If the money is received over a number of years, there may be tax advantages
  • Future income is assured to you
  • You can honestly tell your friends and family that you don’t have any money

Are Structured Settlements Disadvantageous?

  • Unpaid bills may not be paid immediately
  • If your circumstances change, there is nothing you can do to alter the terms of the settlement
  • You don’t control how the money is managed
  • Sometimes it’s more complicated than it seems, and it’s not the final word

How Do You Choose the Right Settlement?

The amount of compensation you require is determined by the specifics of your accident, your particular situation, and your choices. Lump-sum payments are usually always the best option when the settlement is for a little or even medium-sized amount. It rewards you for your rapid losses when the amount is minimal. Setting up a structured settlement for what would end up being minor sums isn’t worth the time and effort.

When greater sums are involved, it’s time to think about whether a structured settlement is right for you. Here are some things to consider when attempting to figure out what’s best for you:

  • Will my medical bills get cheaper over time
  • Should I anticipate that my medical problems and costs would worsen over time as a result of my existing injuries?
  • Will I be able to go back to work after a while?
  • What bills do I have right now that I need to pay?
  • What bills do I now owe that a lump sum payment could help me pay off?
  • Are there any tax advantages that I should take advantage of?
  • Will I be able to properly manage a lump sum if I accept it?
  • Do I want to prevent requests for gifts and loans from others that may require a lump sum payment?

Your personal injury lawyer can assist you in determining what is best for you. During the bargaining process, the opposite side may have some input that will affect the final agreement in your case. Your lawyer can assist you in determining the tax consequences of each option. They can assist you in assessing your specific circumstances, injuries, bills, and expenses in order to help you weigh your choices and make the best decision possible.

A settlement agreement is a legally binding contract. If anything really goes wrong after the parties reach a structured settlement, the courts will apply contract law to execute the settlement. Because a structured settlement is a contract, the parties can normally carry out the provisions of the agreement without the need for court involvement or appeals.


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Posted in: Personal Injury

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