What To Do With Your Personal Injury Settlement

Personal Injury Settlement Amounts Examples

The average personal injury amount is between $3,000 and $75,000, so it can be a big help when your injury settlement arrives. The average personal injury settlement for specific cases can vary widely but often include damages related to:

• Car accidents
• Medical malpractice
• Slip-and-fall accidents
• Wrongful death
• Product liability
• Pain and suffering

Is A Personal Injury Settlement Taxable Or Not? Clarifying The Facts

The personal injury settlement amounts in the examples above don’t take taxes into account. You might wonder if you receive a settlement and if you have to pay taxes on it.

Fortunately, because Nevada has no state income tax, you don’t have to worry about reporting your settlement for state-level taxes. But what about federal taxes?

Generally, a personal injury settlement is not considered taxable. However, the IRS outlines some situations where a portion of the settlement may be taxable, including:

• If you used the settlement to pay for medical expenses you deducted
• If you received compensation for emotional stress not connected to a physical injury
• If you received compensation for lost wages

It’s important to note that taxes on settlements can be incredibly complex. You should always consult a tax professional.

Common Questions On Personal Injury Lawsuit Settlement Amounts

These are some of the most common questions our clients ask about settlements.

How Are Personal Injury Settlements Calculated?

Personal injury settlements are calculated using a variety of factors, including the cost of your medical care, the value of your lost wages, and the extent to which your injury impacts your life.

Is The Settlement Paid All At Once?

That depends. Sometimes, a plaintiff may receive a lump sum. In other cases, they receive the payment in installments. This is known as a structured settlement.

Is It A Good Idea To Accept The First Settlement Offer?

No. Insurance companies almost always start with a low settlement offer in hopes that you’ll take it. When you work with an attorney who is a skilled negotiator, you can almost always reach a higher settlement than the initial offer.

How Much Is An Average Personal Injury Settlement?

On average, personal injury lawsuit settlement amounts range from about $3,000 to $75,000. Settlements can range from several thousand dollars on the low end to multiple millions for especially severe injuries. 

The only way to get a sense of what your case is worth is to talk to a personal injury attorney. An attorney can review your case and give you an idea of what kind of compensation you might be able to recover.

How Long Does A Personal Injury Lawsuit Settlement Take?

This depends largely on the complexity of your case and whether it goes to trial. If you have a relatively uncomplicated situation and your case settles out of court, it may take several months for your case to resolve. However, a complicated case that goes to trial might take years to finalize.

Understand Personal Injury Settlements When You Make A Claim

The personal injury claim process can be a confusing one. Once you receive your settlement, you might still be confused — what do you do now? Here is a list of steps to take once you receive a settlement. 

1. Take A Deep Breath And Wait

You don’t have to decide what to do the first day you receive your settlement. When you make careful decisions, you’re likely to make better choices. Give yourself the time to evaluate all of your options before deciding how to proceed. Place your funds in a savings or checking account until you decide.

2. Understand And Address The Tax Implications

Most personal injury settlement proceeds are not taxable under federal or state law. As long as the injury settlement amounts result from a physical sickness or personal injury (including lost wages, pain and suffering, medical bills, attorney, and contingency fees), your settlement should be tax-exempt. The exceptions to this include punitive damages, damages related to a breach of contract, and interest accrued on a judgment amount.

Once you know what you need to pay in taxes, it’s a good idea to set that amount aside or send in the expected tax payment right away. In any event, you need to start by making sure you’ve got your tax liability paid. Once you’ve addressed taxes, you can begin making a plan for the rest of your settlement funds.

3. Create A Plan

Creating a plan for your settlement funds is essential. Without a plan, you might spend your settlement funds faster than you want to. It’s essential to look at your settlement as a tool that can help you and your family. Carefully create a plan to ensure that your settlement money works for you.

When deciding what to do with your settlement funds, it’s crucial to consider how long you need your funds to last. If you have lifelong injuries, your money needs to last a lifetime. You should strategize based on your injuries, your personal and family goals, and what you need and want your money to do for you in the long term.

4. Take Care Of Your Financial Musts

Now it’s time to start using your cash. The first thing to do is take care of your financial musts. You must have a roof over your head. That means taking care of the rent or mortgage payment and making sure that bills for daily living expenses are up to date. You should also take care of your medical bills.

5. Consider Income-Producing Assets

If you need your settlement to last a lifetime, you might wonder how to make that happen. There are a few types of investments that can help. An annuity is an investment that allows you to make a lump-sum payment in return for a monthly check for a specified period of time.

Another investment called a CD pays a flat interest rate for the term of the CD. In addition to these guaranteed-income options, you might pursue money market funds, stocks, bonds, and investment properties. Income-producing assets can help your settlement fund to grow.

6. Pay Off Debts

In addition to investments, a way to become more financially sound is to pay off debts. You might pay off credit card debts or even the mortgage on your home. Living debt-free can give you more disposable income for what you need and want.

7. Life Insurance

Most personal injury settlements require the victim to agree to release future claims against the responsible party. That means that if your injuries get worse in the future, you will need to cover the expenses yourself. Life insurance from a life insurance company can be a valuable tool to ensure that your family is taken care of in any circumstance.

8. Education

You can use your settlement to get additional education. You might pursue an education that allows you to train for a new career. You might be able to increase your income and find a new profession that you enjoy.

Before you begin any educational pursuit, be sure to do your research. Study the career outlook for the program that you’re considering. Ensuring your program will provide the return you’re looking for can help guarantee that your education is a sound investment in your personal injury settlement.

9. Create Your Will And Trust

When you receive an injury settlement, you need a will and trust. A will and trust can make sure that your interests are represented and your family is protected. There may be advantages to using a trust, and your attorney can help you understand the best options.

10. Consider Working With A Financial Professional

A financial professional can help you determine the best investment plan for your settlement. Experts can help you evaluate your risk tolerance and determine the best course of action. Having someone on your side who has experience with lump-sum funds or monthly payments can show you how to use your settlement to your advantage.

How an Attorney Can Help

If you’re hurt in an accident, receiving a fair personal injury settlement is a great start. However, you also need to know how to structure your accident settlement amount to minimize tax liabilities. 

The personal injury lawyers at Adam S. Kutner, Injury Attorneys, can provide legal advice and help you understand the tax consequences of your personal injury case and settlement. Your attorney can help you understand the best course of action and guide you through the process to make the most of your personal injury claim.