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This originally aired on the Catholic Faith Network’s show CFN Live: https://youtu.be/KiBTzfRe1wo
Personal injury settlements are often lost or not fully utilized due to a lack of planning, particularly in how the funds are managed and spent. This can lead to “dissipation,” where the settlement money is spent impulsively or on poor investments, ultimately failing to provide the financial security it was intended for.
What is “Settlement Planning”?
Settlement planning is a process that helps ensure a successful and beneficial outcome for individuals receiving a settlement, particularly after a personal injury or legal claim. It involves creating a comprehensive plan that addresses various financial, legal, and personal needs, often including structured settlements, special needs trusts, and other strategies.
Does the settlement planner get involved before the medical malpractice or personal injury case is settled?
There is a process in a medical malpractice or personal injury case and often the case is settled without going to trial. It is beneficial to have the settlement planner involved before the case is settled.
Financial Planning: First, there is the financial aspect of the case. This involves understanding the settlement amount, potential tax implications, and long-term financial goals.
Legal Considerations: Then, it is important that the injured party understand the terms of the settlement and how it will impact their life. Ensuring that the settlement terms are legally sound, particularly in cases involving government benefits or special needs trusts.
Minimizing Tax Liability: Generally, settlements are income tax free with certain exceptions. Structured settlements and other planning strategies can help minimize potential tax obligations associated with the settlement.
Interdisciplinary Approach: The approach is to include Settlement planning as part of the lawsuit which often involves a team of professionals, including personal injury attorneys, financial planners, care planners (if needed) and estate planning specialists.
What are the pros and cons of a “Structured Settlement”?
Structured Settlements are often a part of the financial settlement of a personal injury case.
Structured Settlements: A structured settlement is a financial arrangement where a person receives compensation for a personal injury or wrongful death claim in the form of periodic payments over a set period, rather than as a single lump sum.
A structured settlement can offer tax advantages and help manage funds over the long term.
Key Features of Structured Settlements:
- Periodic Payments: Compensation is distributed as a series of payments, often monthly, but can be tailored to individual needs.
- Tax Advantages: Payments received through structured settlements are typically tax-free, which can be a significant benefit compared to lump-sum payments where investment earnings are taxed.
- Financial Security: Structured settlements can provide a guaranteed stream of income, offering financial security and peace of mind for the claimant and their family.
- Customization: The payment schedule can be customized to align with the claimant’s anticipated future expenses, such as medical bills, living costs, education, and retirement.
There may be cons in having a structured settlement such as lack of flexibility, limited access to funds, inflation risks, and potential loss of control.
It is crucial to consult with a financial advisor and legal counsel to determine if a structured settlement is the right option for a particular situation.
When settling a case, should the injured person set up a Special Needs Trust?
A Special Needs Trust should be considered especially if the injured party is going to need ongoing medical or long-term care. A Special Needs Trust can play a critical role in the settlement.
Special Needs Trusts: These trusts can be established to protect government benefits and ensure that funds are used for the beneficiary’s needs, especially for individuals with disabilities or minors.
Long-Term Financial Security: Special Needs Trusts as well as structured settlements can help ensure that funds are managed effectively over time and protect against misallocation or mismanagement.
Protection of Government Benefits: Special Needs Trusts can help individuals receiving public benefits, such as Medicaid or Supplemental Security Income (“SSI”), continue receiving those benefits while managing settlement funds.
Estate Planning: Considering how the settlement proceeds will be distributed after the individual’s death, including potential implications for beneficiaries.
What is the difference in the role of the trial attorney and the settlement planning attorney?
While the trial attorney’s job is to process the personal injury case, the planning attorney is focused on the long-term needs of the injured person.
It is important for a person who receives government benefits, such as SSI and Medicaid, to continue to qualify for those benefits after they sustain a personal injury. The disability settlement planning attorneys can assist the trial lawyer in resolving the cases in ways that protect eligibility for government benefits.
The settlement planning attorney should be brought in as early in the process as possible. The settlement planning attorney can be available to provide expert witness testimony, establish special needs trusts to protect the settlement from hindering the injured party’s public benefits, and aid in the court process to fund the trust once created.
What are the benefits of utilizing a settlement planner in a personal injury lawsuit?
The goal of the settlement planner is to help create and implement a plan so that the injured person’s settlement can provide a better quality of life while preserving important government benefits. This approach can ensure that the money from the settlement does not suddenly disappear. Those settlement funds should provide a safety net for future medical expenses, home care, and other needs, making it possible to pursue their dreams.
Peace of Mind: It comes down to Peace of Mind. A well-planned settlement can help the injured person, and their family feel secure and confident in their financial future.
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Disclaimer: The information provided above is for general informational purposes only and is not legal advice.
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