After you negotiate a settlement amount in an Arizona personal injury or wrongful death case, you’ll have several options for how you get paid. One option is to take a one-time payment or lump sum. Should you choose a one-time payment, you’ll get all the settlement money up front. Another option is called a structured settlement. With a structured settlement, you receive a series of smaller payments over a set period of time instead of all at once.
Which payment option you should choose depends on a variety of factors, including your individual financial needs, tax implications, and other considerations. Learn more about how structured settlements work and their benefits from the Phoenix personal injury lawyers at Lerner and Rowe Injury Attorneys.
Why Choose a Structured Settlement Instead of a Lump Sum?
At first glance, some people may think that the choice is obvious when it comes to personal injury settlements: get all the money you’re owed as quickly as possible in a lump sum. But there are some strategic reasons why you might consider negotiating for a structured settlement rather than a one-time payout.
Better Management of Your Finances
If you are not good with money, receiving your settlement in increments over time may help you to manage your settlement money more wisely. Instead of a large amount of cash just sitting in your bank account (waiting for you to spend it), you can receive the money in more realistic and self-limiting installments.
Guaranteed Payments for Ongoing Treatment
If you or a loved one suffered catastrophic or permanent injuries that will require ongoing treatment, medication, or care for an extended period of time getting a monthly or yearly structured settlement payment can help you pay for these recurring steady expenses.
Interest Earned From Structured Settlement Annuities
When you choose a structured settlement, it’s often paid for using an annuity. Structured settlement annuities will earn an amount of interest over time. If you don’t need the full amount of your settlement right away, a structured settlement can ultimately earn you more money in the long run.
Tax-Free Inheritance for Your Beneficiaries
For the most part, the money you earn from a personal injury lawsuit in Arizona is not taxed as income*. However, if you or your loved one dies and someone else is set to inherit the settlement money, the recipient will have to pay taxes on it. To prevent this, you can choose a structured settlement and designate beneficiaries who can continue collecting the structured payments, tax free, in the event of your death.
*Punitive damages, unlike compensatory damages, are subject to tax.
How Structured Settlements Work in Arizona
Settlements are generally reached by a plaintiff and defendant outside of court to avoid a lengthy trial. If you were injured in a car accident or struck by a vehicle as a pedestrian or bicyclist, for example, then you would be considered the plaintiff and the at-fault driver (or more likely, their insurance company) would be considered the defendant.
Together with your personal injury lawyer and the insurance company, you’ll come to an agreement regarding the amount of your settlement based on the extent of your injuries, the amount of your medical bills and estimated lost wages, and non-economic damages such as pain and suffering. If you choose a structured settlement, you’ll also arrange how and when payments will be made before officially settling the case.
Note: Once the terms of a structured settlement are set, making changes to them is very difficult if not impossible. If your economic situation changes, your only choice may be to sell your structured settlement.
Structured settlements can take many forms. Generally, the at-fault party will pay the full amount of the settlement up front by purchasing an annuity from a life insurance company. The life insurance company will then take over making payments to the recipient according to the stipulations of the settlement agreement. This keeps injured victims from having to have unnecessary contact with the party that injured them and ensures that they get paid.
Structured Settlement Payout Options
The payment structure and timeline associated with a structured settlement can be very flexible, making it a good option for those with unique financial situations. Here are some examples of how you may have your settlement dispersed:
- Structured settlements may sometimes include an initial lump sum paid up front before regular scheduled payments begin. For example, attorney fees are usually due at the end of a successful personal injury claim. Your structured settlement may include a one-time lump sum so you can pay your attorney or attend to other more immediate expenses. Then you’ll get smaller regular payments going forward.
- You can also delay receiving your structured settlement until you retire, allowing it to accrue interest in the meantime.
- If you have significant financial challenges ahead of you in the next few years as you recover and get back into the workforce, you may choose a structured settlement that starts with larger scheduled payments and decreases over time.
- On the flip side, if you don’t need as much money in the short-term, you can opt for a structured settlement in which your payments slowly increase over time, allowing for an earlier retirement and more interest earned.
Get Help With Your Personal Injury Settlement
Whether you choose a structured settlement or a lump sum payment, personal injury settlements are generally considered final once you sign the agreement. In order to get the highest amount of compensation, you need an attorney who will fight for your rights and negotiate the most favorable outcome.
When you contact the legal team at Lerner and Rowe Injury Attorneys, you’ll be met with compassion, experience, and professionalism from the get go. Whether you’re just wondering if you should pursue a case or unsure about a settlement offer from the insurance company, our attorneys can help.
Contact one of our Phoenix (602-977-1900) or Tucson (520-977-1900) offices today to schedule a free, no obligation consultation with our team. We’ll discuss the details of your case, review all your legal options, and help you make the right decision for you and your family. You can also connect with a LiveChat agent online, or send us your case details for review.