Your Guide to Structured Settlements and Catastrophic Injuries

You’re badly injured in a sudden accident, and another party is at fault for what happened. As a result, you decide to bring a claim for financial compensation. When it’s time to negotiate a settlement, the other side suggests resolving the case with a structured settlement.

What is a structured settlement and how do you know if it’s right for you? The catastrophic injury attorneys from our Elite Litigation Group explain everything you need to know about structured settlements and catastrophic injuries.

Structured Settlements and Catastrophic Injury Claims

Structured settlements are a way to manage financial compensation for victims of catastrophic injuries. The purpose of the settlement is to ensure that the victim continues to receive a steady stream of income for a period of time.

Structured settlements are a common way to resolve litigation involving a catastrophic injury. The parties agree to settle the case by the defendant purchasing an annuity for a certain amount. The victim then receives the agreed-upon amount periodically according to the schedule.

What Is a Structured Settlement and How Does It Work?

A structured settlement is a resolution of a lawsuit by an agreement for periodic payments. Rather than the plaintiff receiving compensation in a lump sum, they receive the money over time. Structured settlements work by creating set amounts and a timeline for periodic payments. Usually, the defendant purchases an annuity in order to meet their obligations. The structured settlement amount doesn’t change even if the victim’s needs change or economic conditions change.

What Is Better—Lump Sum or Structured Payments?

A lump sum may be better if:

  • You have fully recovered from your injuries
  • The amount of the settlement is relatively small
  • You’ll likely be fully recovered shortly after the settlement
  • You have the means to support yourself in the future
  • The amount of damages is known, and the settlement reimburses you fully

A structured payout may be better if:

  • Injuries are expected to last throughout a lifetime
  • It’s essential to make the funds last long into the future
  • You don’t want the risk associated with managing a lump sum
  • Price ratings for adjusted life expectancy may provide a favorable rate for a victim
  • You prefer to have a set, predictable payment that you receive on a set schedule

Generally, lump-sum payments are used when damages are known, and the amount is relatively small. However, a structured payout may be better when injuries are lifelong, damages are significant, and the victim will need financial support for a lifetime. These are all characteristics of a catastrophic injury.

Do I Have To Take a Structured Settlement?

No, you do not have to take a structured settlement. It’s up to you to negotiate any terms of your payment, including how you receive the judgment. If you go to trial, the award that a jury gives is not structured. As part of a negotiated resolution to the case, the courts uphold any reasonable, lawful terms, including a structured settlement. However, it is not mandatory, and you do not have to take it.

Are Personal Injury Settlements Taxable?

Whether you pay taxes on a structured settlement depends on the purpose of the compensation. Generally, you do not pay taxes on compensatory damages. Payments for compensatory damages make you whole for what you have already lost. Therefore, it would be a penalty to the victim to tax compensatory damages. How you negotiate and define the settlement is crucial to whether it is taxable. The rules for taxes on a structured settlement are the same as the rules for lump-sum judgments.

Types of Cases Where a Structured Settlement May Be Appropriate

Some types of cases involving catastrophic injury where a structured settlement may be appropriate include:

How Are Personal Injury Structured Settlements Paid Out?

To help you understand the process, here are some examples of structured settlements:

  • A driver runs a red light. They strike a vehicle traveling lawfully through the intersection. The victim sustains a severed spinal cord, which results in paralysis from the waist down. The victim has a large amount of immediate medical care needs. They are also unable to return to their employment, which requires lifting and walking. The parties agree to resolve the claim through the defendant’s insurance policy for $2 million. After an initial payment of $500,000, the rest of the money is used to purchase an annuity as a structured settlement. Under the terms of the structured settlement, the victim receives an annual payment of $75,000 to continue throughout their lifetime.
  • The victim is shopping in a department store. They step on an escalator to travel between floors. However, it is in poor repair. The company has failed to fix it after several minor accidents. It stops unexpectedly and then jerks forward, sending the victim tumbling down the stairs. She sustains a severe head injury that interferes with her daily life activities. The victim agrees to a structured settlement to resolve the case. According to the terms of the agreement, the victim receives monthly payments of $4,000 per month for the remainder of her life.

Is a Structured Settlement Best for a Catastrophic Injury?

A structured settlement is often, but not always, the best result for a catastrophic injury. The victim should be fully aware of how structured settlements work, the limitations and what to expect in resolution of the claim. They need to know the amount and time periods for payment, as well as understand other factors like taxation, limits on transferability and creditworthiness of the issuing company.

Attorneys for Structured Settlement for Catastrophic Injury

You may have specific questions regarding your case. You may wonder how much to ask for in a personal injury settlement and how much settlement for neck injury claims is appropriate. Should you accept a workers’ comp settlement back injury offer? What is the average insurance settlement for neck and back injury? We’re here to answer all your questions and advocate for you throughout the process.

An attorney for structured settlements for catastrophic injury can help you understand and consider all of the relevant points of structured settlements for your personal injury claim. They can help you pursue your case, considering the specific details of your accident and injuries. Contact an experienced legal team for a no-obligation case evaluation today.

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