Filing A Personal Injury Lawsuit? Here’s What To Do With Your Settlement Money
An overwhelming 70% of sudden money recipients go broke within a few years.
Personal injury settlement money is a financial windfall that needs proper management. Otherwise, you could find yourself even worse off than before your lawsuit.
Keep reading to learn some valuable information about personal injury settlement money.
I Won My Lawsuit. What’s Next?
Once you’ve finally settled for a reasonable amount, it feels like the battle is over! Keep in mind that your cash settlements won’t appear in your bank account right away.
Courts need to issue an order of settlement, and all parties must complete the paperwork. The defense attorney will prepare what’s known as the Release. This will list out the conditions and terms of the settlement.
More negotiations may ensue, and the other party may decide to appeal the court’s decision. Once this process completes, an insurance company will issue a check.
Your lawyer receives this check. How long can a lawyer hold your settlement check? It depends on how many unpaid debts there are in connection with your claim. This may include:
- Unpaid medical bills
- Health insurance payments
- Lawyer’s fees
- Expert witness fees
Once these fees and debts get deducted, you’ll finally receive the rest of your settlement.
Factors to Consider About Your Settlement Money
It’s easy to get caught up thinking you’ll receive a huge sum of money you can spend how you’d like. Don’t neglect to take into account the following factors.
Taxes
When considering your settlement, you need to determine if it will be subject to taxation. How much tax do you pay on settlement money? It depends on the circumstances surrounding your claim.
Compensatory damages won’t get taxed, but punitive damages will. New tax laws specify that injuries must be physical to get tax-free treatment. That means emotional distress may not qualify for a tax exemption.
With these changing laws, it’s best to consider hiring a tax attorney. If you fail to pay taxes on taxable settlement money, then you could face criminal penalties.
How Are Settlements Paid Out?
In most circumstances, your lawyer will provide you with a lump sum from your settlement.
At times, your agreement will involve structured settlement cash. That means you’ll get a percentage of the settlement on a fixed schedule.
Reach out to The Benton Law Firm if you have questions about personal injury settlements.
Tips on Managing Your Funds
Once you finally get your funds, it’s unlikely you’ll get any advice on what to do with your money. Here are some great ideas to get you started:
- Pay off past debts
- Begin a savings account
- Go back to school
- Invest in property
- Invest in a business
- Share the wealth (donate it!)
I know. Saving money as an adult seems like an unachievable feat. When you’ve received a windfall of money, saving some is one of the best decisions you can make.
Invest in yourself and your future by putting at least an emergency fund amount aside for later.
What Will You Do with Your Settlement Money?
Whatever you decide to do with your settlement money, do it with these tips in mind. Don’t forget about the tax implications, and try to save some when possible.
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