Structured vs. Lump Sum Personal Injury Settlements

What Is a Structured Settlement?

A structured settlement is when you receive your injury settlement in smaller, periodic payments instead of with one, large payment. You receive the settlement funds over an extended period of time rather than shortly after the settlement. A structured settlement may vary in how often you get paid and the amount of the payments. You may receive payments for years in the future.

When you negotiate a structured settlement, you can create whatever terms you like. You might ask for a large payment up front to take care of existing medical bills and bills that result from missed work. You might want more substantial payments up front if you expect your medical bills to diminish over time. On the other hand, you might want payments to increase over time to account for increased medical bills as you age or expenses for growing children. You can tailor your structured settlement in whatever terms you agree on with the other party.

How Does a Structured Settlement Work?

If you resolve your case with a structured settlement, the settlement fund usually goes to a third-party insurance company to manage. The responsible party calculates how much they need to pay in to fund the settlement. It’s a complex calculation. Because the funds can increase with investments over time, the responsible party typically pays in an amount that’s smaller than what you actually receive in payments.

Some of the terms to think about for your structured settlement include:

• The amount of payments
• The frequency of payments
• How long you want to receive payments, for example, in years
• Whether there’s a larger payment up front
• If there’s going to be a larger payment at the end
• Whether the payments increase or decrease over time
• If payments terminate on the death of the recipient or continue for a set period of time

What Are the Advantages of a Structured Injury Settlement?

• You don’t run the risk of spending the money too fast
• There may be tax benefits to receiving the money over a period of time
• You have assurances that you’ll have income in the future
• When friends and family ask for money, you can honestly say you don’t have any

What Are the Disadvantages of a Structured Settlement?

• You may not be able to pay outstanding bills right away
• There’s nothing you can do to change the settlement terms if your circumstances change
• You’re not in control of managing the money to make it grow
• It’s not final, and it’s often more complicated

How Do You Know What Type of Settlement Is Right for You?

The settlement that you need depends on the circumstances of your accident, your personal circumstances, and your preferences. If the settlement is a small or even medium-sized amount, lump-sum payments are almost always the best option. When the amount is small, it compensates you for your immediate losses. It isn’t worth the time and effort to set up a structured settlement for what would end up being minimal payments.

When larger amounts are involved, it’s time to consider whether a structured settlement serves your best interests. Here are some of the things to think about when you’re trying to decide what’s best for you:

• Are my medical bills going to decrease over time?
• Should I expect my medical issues and costs to increase over time based on my current injuries?
• Will I be able to return to work after a period of time?
• What current bills do I have that a lump sum payment could help me take care of?
• Are there tax benefits that I want to take advantage of?
• If I accept a lump sum, will I be able to manage the amount effectively?
• Do I want to avoid gift and loan requests from others that might come with a lump sum payment?

Your injury lawyer can help you decide what’s best for you. The other side may also have some input as you go through the negotiation process that may impact the final agreement in your case. Your attorney can help you understand the tax implications of each choice. They can help you evaluate your personal circumstances, injuries, bills, and expenses to help you weigh the options and make the best possible choice.

What Does the Nevada Supreme Court Have to Say About Structured Settlements?

A settlement agreement is a contract that’s enforceable by law. If something goes awry after the parties reach a structured settlement, the courts enforce the agreement according to Nevada contract law. Because a structured settlement is a settlement agreement, the parties are usually able to carry out the terms of the settlement without needing court intervention and appeals.

That means there are only a couple of Nevada Supreme Court opinions that even mention a structured settlement. While the opinions don’t go into great detail or create new rules about structured settlements, the opinions acknowledge that structured settlements are a valid option for Nevada personal injury accident victims.

How Can a Personal Injury Attorney Help?

An experienced attorney has helped thousands of clients and has extensive experience in both structured and lump sum settlements.
They know what needs to be in a structured settlement to protect your best interests.

Your lawyer can help you carefully build your personal injury claim and negotiate the terms of your settlement and consider all of the options to arrive at the best possible resolution.