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Personal Injury Settlement Options

If you have a personal injury claim and expect to receive a settlement or verdict in your favor, you may have questions about the best way to receive payment.  It is a good idea to begin considering options before the final settlement so that you are prepared.  A skilled personal injury attorney, like those at Krum Gergely & Oates, should be able to provide guidance to help you make the right decision for your individual circumstances.

Full, immediate payment

The simplest way to receive your settlement is as a one-time payment from the defendant or their insurance company.  If you have an attorney, this lump sum will first be paid to them.  Your lawyer will then pass the settlement along to you after subtracting the lawyer’s fee and expenses and the amount required to satisfy any liens that may exist for medical services you received to treat your injury.

Receiving a lump sum payment allows you the most freedom of any type of settlement.  After the money is in your possession, you can spend, save, or invest it as you please.  However, receiving a large amount of money at one time can be overwhelming for some people.  If your friends and family are aware that you received a lump sum payment, you may face pressure from people asking for your financial help.

Structured Settlement

A structured settlement can be a good option for larger amounts of money, especially where the recipient has lasting injury that requires treatment or supplemental income over time.  It can also be a good way to protect the funds if the recipient is a minor or young adult at the time of the settlement.  Structured settlements are sometimes called annuities, referring to the fact that payments are often made from structured settlement funds annually.

There is a small risk, however, in choosing a structured settlement, because if the company administering the settlement (investing and managing your money and making the payments) goes bankrupt, then your money could be lost.

There is a lot of flexibility in how your structured settlement works.  You can choose the length of time that you want it to last and how often you want to receive payments; you also get to choose the size of the payments.  You may choose to receive money just once a year, for example, or you may want to receive payouts more often.  

You can work with the company setting up your structured settlement to take into account potential future situations and contingencies, such as medical advances if you have suffered permanent injuries.  If an expensive new medical technology emerges during the course of your annuity payments, you may wish to receive part of your settlement as a lump sum, temporarily altering your payment schedule.  While a structured settlement doesn’t allow you the absolute freedom of a full lump sum payment, you do have some control.

Some companies offer a “way out” of your structured settlement, so to speak.  If a crisis arises and you suddenly need access to the money that is subject to the structured settlement, companies will allow you to “sell” all or part of your payment stream in exchange for what is essentially a cash advance.  While this can be a lifesaver in a serious emergency, it should not be undertaken lightly and you should carefully examine the terms and even consider consulting a legal professional before selling all or part of your personal injury annuity.


An experienced attorney, like those at  Krum Gergely & Oates, should help you to structure your settlement in a way that makes sense for you; elements of different settlement types can be used to create a personalized structure.  You can receive a large portion of your personal injury settlement now and have the rest paid to you at regular intervals over a period of years, for example.

It is important to keep in mind, regardless of the way you choose to receive your settlement, that, while you do not have to pay taxes on your personal injury award, any interest is taxable.  This means that, if you put your settlement money in the bank and it earns interest, you have to pay taxes on that interest.

Punitive damages are another part of a personal injury award outside of the rule that most personal injury payments are tax-free.  Punitive damages are meant to punish the defendant rather than compensate the injured person for their loss.

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