After winning a personal-injury lawsuit, you might have the option of accepting a lump-sum settlement or a structured settlement. With a lump-sum settlement, the defendant resolves the case by giving you one large payment. A structured settlement gives you guaranteed income over the course of several years. If your accident resulted in a permanent disability, here are six things you should consider when deciding whether to accept a lump-sum payment or a structured settlement.
1. Disability-Related Expenses
If you expect to have ongoing medical expenses due to your disability, opting for a structured settlement is often the best decision. With a structured settlement, you can choose to receive a large payment annually or several small payments throughout the course of the year. If you always have income coming in, you'll have cash available to pay for emergency treatment, hospitalization, physical therapy, medications, and other disability-related expenses.
2. Social Security Benefits
The Social Security Administration determines your eligibility for benefits by reviewing information about your income and assets. If you choose to accept a lump-sum settlement, receiving such a large sum of money will cause you to exceed the monthly income limit, as well as the cap on personal assets, reducing your future SSI payments. When you choose a structured settlement, you can negotiate the size and frequency of your payments, so it might be possible to avoid affecting your eligibility for SSI.
3. Life Expectancy
Choosing a lump-sum settlement gives you access to a large amount of money at one time, but if you have a physical disability that is expected to shorten your lifespan, a structured settlement might be a better choice. When you negotiate the terms of your structured settlement, you can specify if you want your heirs to continue receiving payments after your death, giving your spouse or children access to regular income. If you have a large amount of cash on hand at the time of your death, your heirs will have to use the money to pay for your final expenses, reducing the amount of money available to them.
4. Financial Concerns
It is tempting to take a lump-sum payment if you have immediate financial needs, but by doing so, you give up the opportunity to receive regular income. Fortunately, you can negotiate your structured settlement to include a small lump-sum payment to take care of your accident-related medical expenses or make up for the income you lost while you were receiving treatment for your injuries. After you receive the lump sum, you will start receiving structured-settlement payments according to the terms of your agreement.
5. Housing Concerns
When you have to decide between a lump sum and a structured settlement, your current housing situation might be the deciding factor. If you need to remodel your current home to accommodate your disability, the funds from a lump-sum settlement can help you pay for the construction work immediately after your accident, eliminating the frustration of living in a home that is difficult to navigate in a wheelchair or on crutches. If your house is already suitable for someone with your disability, you may not need as much money right away, making a structured settlement a good option.
6. Tax Implications
Payments received due to illnesses or injuries are exempt from federal income tax, making structured settlements a very attractive option from a tax perspective. However, the money in a structured settlement is subject to estate tax. If you pass away due to complications of your injury, your heirs will have to pay estate tax on the value of the settlement at the time of your death. With some careful planning, it might be possible to reduce the amount of estate tax owed, so talk to an attorney to determine the best way to limit your tax liability.
If you recently won a personal-injury lawsuit, think carefully before accepting a lump-sum settlement. A structured settlement can help you generate regular income to pay your expenses and plan for the future. Should you encounter financial difficulties after accepting a structured settlement, you always have the option of doing a structured settlement buyout, which is when a company gives you a lump-sum payment in exchange for the right to receive your future structured-settlement payments. You can visit http://www.mylumpsum.com to learn more.
Share17 March 2015
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