You may have heard the term “structured settlement” in commercials or seen it on billboards, but despite being a part of catchy ad taglines, structured settlements have real-world consequences for injured people. In fact, according to the Internal Revenue Service (IRS), more than $100 billion has been paid to fund active structured settlements.
When you “win” a personal injury claim, meaning when the other party agrees to pay for your damages, you receive a settlement. That settlement can come all at once or in scheduled installments. The second option is called a structured settlement.
Structured settlements can be complicated, and it can be confusing to figure out who should opt for one. Learn more about structured settlements in California personal injury cases, and when you need to talk to a lawyer about your specific situation, don’t hesitate to get a free consultation with Simmrin Law Group.
What Is the Average Personal Injury Settlement in California?
Every personal injury case is different. That’s why there’s no “average” number for settlements – compensation can range widely depending on the factors surrounding your accident. The only way to give you a good idea of what your settlement could be is to know the details of your situation.
Factors that could affect how large your settlement is can include:
- The extent of your injuries
- How expensive your medical bills are
- How much fault the other party – and you – had in the accident
- Any pain and suffering that you experience because of your injuries
In reality, a “good” settlement is one that covers all of your damages and allows you to recover without worrying about money. That can vary from person to person, as everyone’s recovery looks different.
One thing that could help you understand what your settlement could look like is a meeting with a personal injury lawyer in California. We offer free consultations where you can talk with an attorney who can assess your case and tell you how much you might be able to get from your settlement.
For a free legal consultation, call (310) 896-2723
How Is a Settlement Paid Out?
In general, there are two ways that settlements are paid out: lump sum or structured settlement. Lump-sum payouts are all at once, and this is what most people choose. The other party (or typically their insurance company) cuts you a check, your lawyer takes their contingency fees from it, and then you get the rest to pay for bills and other damages.
Structured settlements are much different – instead of getting one check for your damages, instead, you’re paid in installments, typically on a schedule. The money usually is transferred from the insurance company of the liable party to another company that handles structured settlements, often a life insurance company.
People who wish to go from a structured settlement to a lump sum later down the road have to sell their structured settlement to a company that pays for them. Purchasers usually charge a certain percentage of your structured settlement, then pay you the rest of your compensation.
Are Structured Settlements Worth It?
The fact is that most settlements are paid in a lump sum, i.e., all at once. For many personal injury victims, this is the best course of action–getting all of a settlement at once means that the injured person is able to pay all of their bills and move on from their accident.
However, depending on your injuries and the size of your settlement, it may be worth it to opt for a structured settlement. Usually, those who decide to go with a structured settlement are people whose payout is very large – that usually means their injuries and other damages are particularly severe, and they may need ongoing treatment in the future.
What about Larger Settlements?
Many people with large settlements, much like lottery winners or people with very large inheritances, find that handling huge sums of money presents more problems than the money solves. The paperwork, stress, and pressure presented by suddenly having hundreds of thousands of dollars–maybe even millions–can be overwhelming.
Therefore, getting a structured settlement may be worth it if you stand to receive a remarkably large sum of money for your damages. If you’re considering a structured settlement, a personal injury attorney in California can help. You should always consult with a lawyer before you opt for a certain type of settlement.
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Are There Taxes on Structured Settlements?
No, technically, there are no federal or state taxes on any compensatory settlement, whether it’s a structured settlement or a lump sum. This is to protect injured parties and make sure they can recover enough money to support themselves.
Originally, it was just lump-sum payments that were tax-free, but in 1982, Congress passed the Periodic Payment Settlement Act, which protects structured settlements from taxation as well. However, in 1996, the tax code was amended to disclude any injury that is not visible, such as pain and suffering, and punitive damages – those are still taxable.
Taxes do sometimes play into people’s decisions as to how they will receive their settlements. That’s because, if someone were to take a lump-sum payment and invest it in dividends so they could get returns on their settlement, those returns would be taxable. That means structured settlements, over time, do have a tax advantage over a lump sum.
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Talk to a Personal Injury Lawyer About Your Settlement for Free
The decision to take a structured settlement or a lump-sum payment can be a very difficult one–each has its own pros and cons. If you’re deliberating on whether you should file a personal injury claim or how you should receive your settlement, the California personal injury lawyers at Simmrin Law Group can help.
We care about your injury and want to help you recover from the damages that someone else’s negligence caused. Call us or contact us online today to get your free consultation with one of our personal injury attorneys.