When a client settles a personal injury or workers’ compensation claim, there are different options for receiving the settlement proceeds. One option is a structured settlement.
At Graham Law, depending on our client’s situation, we often consider structured settlements. They can be helpful for protecting settlement money paid to a minor child, but adults might also benefit from receiving tax-free payments over time instead of a single, one-time payment.
How Structured Settlements Work
When settling a personal injury or workers’ compensation case, the injured person can choose to accept their settlement proceeds over time in installment payments. This is known as a structured settlement.
Terms and Benefits
The terms of the structured settlement describe how often payments are made, in what amount, and for how long.
Structured settlements can be customized to suit the client’s needs. The injured party can receive one lump sum on a future date, or multiple payments over an agreed-upon schedule.
Benefits of a structured settlement include the accruing of interest on your initial settlement funds, tax-free payments, and the guarantee of a large financial brokerage firm that your settlement proceeds will be protected and paid to you in the future, per the terms of your structured settlement agreement.
Structured Settlement For a Minor Child
Structured settlements are frequently used to protect settlement proceeds involving minor children.
A minor child’s attorney and parent/guardian will determine what type of structured settlement is appropriate for the child. In all cases involving minor children, the court must approve the structure settlement as being in the minor child’s best interest.
Once approved by the court, a child’s parents, guardian, or even the child themself will not be able to access the structured money before the court-approved timeframes.
Structured Settlements for Adults
The idea behind structured settlements for minors—that settlement proceeds need to be available long-term to fund essentials—applies to adults as well.
Personal injury settlements are intended to pay for things like medical care and lost income. But the plaintiff is free to spend the money however they want. It may be tempting to spend a large, lump-sum lawsuit payment on non-essentials. And investing the settlement money could result in taxable income.
The main advantage of a structured settlement is that it provides a continuous stream of tax-free income. Because structured settlements are flexible, plaintiffs can choose a payment plan that is appropriate for them and their family.
Graham Law Is Invested in Your Future
Anyone concerned about their ability to responsibly manage a legal settlement award may want to consider a structured settlement for themselves or their minor child. There are also alternatives to lump sum payments and structured settlements, such as investment portfolios and trusts, that may work better in some situations.
Graham Law can help you structure a settlement so that your family is taken care of for years to come. As Your Personal Injury Firm, we are invested in your future and have your best interests in mind not only as a client, but as a member of our community.
