If you or a loved one has suffered from a catastrophic injury, one topic you might want to learn more about is structured settlements. When you are considering a claim that involves traumatic brain injury, spinal cord injury, burn injury, or other catastrophic harm, you should know that one of the ways such cases are often resolved is through the use of structured settlements.
A catastrophic injury is one that causes significant, permanent damage to a victim’s quality of life. While financial compensation can never bring back loss of function, it can cover medical expenses, pay for property destruction, and compensate for pain and suffering. When a case is won or a settlement is reached, you can be recompensed through either a lump sum payout or a structured settlement.
Catastrophic injuries often occur as a result of vehicular crashes (including DUIs), workplace accidents (including hazardous materials and a disregard for worker safety), faulty products or pharmaceuticals, and intentional acts of violence.
While we at McNeely Stephenson understand that financial compensation will not undo the harm you have suffered, it does not mean your catastrophic injury claim should be taken lightly. Contact us now to learn more about your rights under Indiana personal injury law.
What is a Structured Settlement?
When you settle or win a catastrophic injury case, you are likely to be offered monetary compensation known as damages. If you are not offered damages in a lump sum payment, you may be offered compensation by way of a structured settlement, although usually you are given a choice between the two. Structured settlements are common in catastrophic injury cases because they have certain advantages for both parties.
A structured settlement is one type of financial tool for handling damages in a personal injury case. Briefly, a structured settlement is a negotiated arrangement where a personal injury claim is resolved by receiving all or a portion of an injury settlement in the form of periodic payments, as opposed to being given financial damages all at once in a lump sum. Both parties must agree on the settlement, on the schedule of payments, and many other details. Structured settlements are common as an alternative to a trial; a structured settlement can mean that an agreement is more likely to be reached, or reached more quickly, than if a trial is pursued.
Structured settlements can include many legal provisions. Often an annuity (an insurance product) generates the future payments to the victim. Sometimes a structured settlement paid out over the injured person’s lifetime can compensate them more effectively than a lump sum can.
The Pros of Structured Settlements
Structured settlements have some notable advantages, including the following:
- You could receive a considerable tax benefit because, under U.S. Tax Code, personal injury settlements paid over time are usually free of federal taxes, with the exception of payments for punitive damages or for accrued interest. (Speak to a qualified attorney for details.)
- Structured settlements can be a better solution for those who need fixed payments that they can count on, paid out over a specified period of time.
- Settlements can be designed to cover many types of future contingencies, which can be helpful depending on your long-term situation.
- Because a settlement is usually in the form of an annuity administered by an insurance company, state insurance laws protect you by making sure that the insurance company’s obligations to you are covered. Many states, including Indiana, have a safety net program that protects your payments should the insurance company run out of funds (become insolvent).
- Structured settlements can be combined with lump sums, with the latter meant for immediate expenses such as payments for debts incurred, rehabilitation costs, medical bills, and so forth.
- You do not need to do anything to invest a settlement, as you would need to for a lump sum, or worry about spending a large sum of money unwisely.
- A settlement can be designed so that it is transferred to a named beneficiary or beneficiaries should the injured party die within a specified time period.
- A structured settlement can protect the injured party from unscrupulous friends or family members, or from crooks who prey on others, like those who would convince an injured party to put their sum in dubious “investments.”
- If the person suffering from the catastrophic injury is a minor, a judge will often insist on a structured settlement in order to protect the minor’s financial future.
- Structured settlements can also benefit the party allegedly at fault in various ways. For that reason, settlements often facilitate an agreement that is acceptable to both sides more quickly than a trial would.
The Cons of Structured Settlements
Structured settlements can have their downsides:
- Once you sign the settlement agreement, it cannot be changed, so you must be sure that the settlement is what you want and that it will work best for you. Because many provisions can be specified in settlements, you need to be absolutely certain before you sign.
- You lose flexibility in exchange for the certainty of a settlement. This means, for example, that you will not have a large amount of money that you could use to buy a house outright, but you will have a guaranteed stream of income.
- Should inflation rates exceed the norms, your set payments could end up being too small for future expenses.
- Unless the settlement’s funds are paid to a custodial account, you could lose your right to Medicare and Medicaid, should you need them later. (Consult a qualified advisor for more details.)
Two Structured Settlement Examples
Two common situations are those in which a minor or an adult with dependents suffers from a catastrophic injury:
- A minor whose vehicular crash due to another’s fault means that their catastrophic spinal injury leaves them a quadriplegic. The minor will need specialized, life-long equipment and care, as well as the certainty of a lifetime income. Let’s say the minor receives a $3.5 million settlement. A million might be provided up front in a lump sum for medical bills, rehabilitation expenses, a customized vehicle, and other items. The remaining $2.5 million would be “structured” in an annuity to provide a certain monthly amount for life that would cover the minor’s living expenses.
- An adult with dependent children experiences a catastrophic burn from an explosion at work. The settlement provides enough to pay for immediate expenses while another amount is placed in an annuity. The adult not only has current bills paid but also receives $10,000 per month for life so that they and the dependents are sufficiently cared for. Beneficiaries are specified should the injured person die within a certain number of years, so that the beneficiaries’ financial situation remains stable.
In a number of circumstances, a settlement with a structured payout is both a reasonable and a best-case alternative to seeking a trial. However, an experienced and skilled catastrophic injury attorney will discuss the facts of your case with you and help you decide whether your interests are best served by a structured settlement, a lump sum, or a trial.
>What is your next step toward justice?
If you or a loved one suffers a catastrophic injury and you win your case, you may be offered a structured settlement, where multiple payments are made over a certain time period, instead of one single lump payment. Structured settlements are common but are also exceedingly complex, with many pros and cons. It pays to have skilled legal counsel well-versed in structured settlements when pursuing a catastrophic injury case, ones such as the Indiana attorneys at McNeely Stephenson.
You can be assured that Mike Stephenson and Brady Rife are willing to go the distance on behalf of you and your family. Keep in mind that there is a statute of limitations – or a deadline – for filing Indiana personal injury claims, so it is unwise to delay. If you were injured as a result of someone else’s negligence, you deserve compensation. Don’t lose the opportunity to obtain the money you need to put your life back on track and to make your family’s future financially secure. We offer free consultations and would like to discuss how we can be of service to you. Contact McNeely Stephenson today by calling 1-317-825-5200, or use our online contact form.