Understanding Your Settlement Check Payout: What Do I Need to Know?
According to the Bureau of Justice Statistics, only four percent of personal injury claims reach the inside of a courtroom. This means 96 percent of all personal injury cases get resolved before the trial phase of the resolution process. Either the plaintiff drops a civil lawsuit or both parties agree to reach a favorable settlement. A vast majority of personal injury claims end up in a settlement.
Understanding your settlement check payout starts with an understanding of the negotiations that take place between both parties.
One of the reasons why a legal settlement is a popular option is because of the significant amount of time it takes for a trial to conclude. Although your personal injury attorney works on a contingency fee basis, you still take a hit financially because of the time you miss from work while you attend trial proceedings. A trial also is highly stressful, with the plaintiff spending time under oath answering questions from both lawyers.
When you file a civil lawsuit for a personal injury case, the goal is to recover compensatory and possibly punitive damages. Special compensatory damages cover the costs associated with medical expenses and lost wages. On the other hand, general compensatory damages compensate plaintiffs for pain and suffering. If you decide to settle a personal injury claim, you want the settlement to reflect the compensation you would have received had you won your claim.
For more than three decades, the personal injury attorneys at Morgan & Morgan have helped many clients avoid the trial phase of a civil lawsuit. With our experienced team of litigators, we negotiate favorable settlements that give our clients the compensation they deserve. We understand the stress and anxiety that develop during a civil trial, as well as the time and money we can save by negotiating a settlement. When you meet with a personal injury lawyer from Morgan & Morgan, you should leave the meeting understanding your settlement check payout.
Schedule a free case evaluation to discuss your personal injury case with one of our highly rated lawyers.
What Is a Legal Settlement?
A legal settlement represents a formal and legally binding agreement that ends a dispute. In the case of a personal injury claim, the plaintiff agrees to certain conditions that lead to the resolution of the dispute. The plaintiff agrees to terminate the lawsuit, while the defendant agrees to the terms that include the amount of compensation.
Your personal injury lawyer might settle your claim before you file a civil lawsuit. However, most legal settlements occur after the plaintiff files a lawsuit. A legal settlement typically ends with a payout to the plaintiff that covers most, if not all of the costs associated with a personal injury incident.
What Are the Important Terms of Your Settlement Check Payout?
Before you dive into negotiations with the defendant, you should learn about the most common and important terms that give you an understanding of your settlement check payout. The following terms play a significant role in determining how you want to receive compensation for your injury or injuries.
You have two ways to get paid with a settlement. First, you can receive a lump sum payment. Second, you can negotiate a structured settlement that follows a payment schedule, such as weekly, monthly, quarterly, or annually. Your personal injury lawyer might negotiate a mixed structured settlement that includes a combination of two or more payment schedules.
Your payment schedule might start with high payments, only to decrease over time according to an agreed-upon schedule. Decreasing payments might make sense if you anticipate healthcare costs to decline over time. A structured settlement that includes decreasing payments also can involve a wrongful death case when a minor receiving payments reach adulthood.
One of the most important benefits of a structured settlement is that it allows you to earn interest, which increases the payments to account for inflation. You also can settle a personal injury case to have the payments increase over a defined schedule. For example, increasing payments help you cover the expected higher costs of healthcare.
Initial Lump Sum
Many structured settlements include an initial lump sum that is substantially higher than the rest of the payments. An initial lump sum helps you cover the costs of attorney fees and the initial medical expenses, such as the cost of diagnostic tests and a treatment program.
Final Lump Sum
A larger payment at the end of a structured settlement schedule can help an adolescent pay for college or a young adult make a down payment on a home. Negotiating for a final lump sum payment is not as common as receiving an initial lump sum payment because of the negative impact of a future inflationary period.
What Are the Steps to Receive a Settlement Check Payout?
The process for settling a personal injury claim does not end when the negotiations end. You still have a few steps to complete before you receive your settlement check. The key is to remain patient and lean on the legal expertise of your personal injury attorney.
Sign Release Form and Important Legal Paperwork
When your personal injury attorney negotiates a settlement with the other party, you receive a document called the Order of Settlement. You and the other party have either 30 or 60 days to submit all the paperwork associated with the document. The deadline depends on the court’s legal request. The most important paperwork in the Order of Settlement is the release form.
The defense lawyer for the other party prepares the release form, which establishes the terms and conditions of your legal settlement. You must declare in the release form that you will not take further legal action against the party for the same injury or injuries covered by the initial personal injury claim.
Your attorney reviews the Order of Settlement to make sure every term and condition matches your best interests.
Insurance Company Releases the Settlement Check
The other party’s insurance company pays out your settlement compensation. Remember the insurance company will not approve compensation until it receives the release form. The other party’s insurance company is legally obligated to send you the first check as soon as the company receives the release form. Sometimes, processing issues can delay the delivery of a settlement check.
The check written by the other party’s insurance company should be addressed to you and your personal injury lawyer. You do not receive the settlement check directly because your legal counsel deducts a certain amount of money for legal fees and other types of expenses.
Deposit Check to Pay Liens
Your lawyer deposits the settlement check into an escrow account until the bank clears the check. Putting the settlement check into an escrow account ensures the insurance company has enough funds to cover the check payout. If you have any outstanding debts owed to certain companies or government agencies, the settlement check remains in escrow until you fulfill your financial obligations. You might owe money for medical bills, as well as legal expenses.
You must pay off your debts before you receive the legal settlement check. Otherwise, you might face serious legal consequences from a company or a government agency.
Receive the Settlement Check
After your personal injury attorney takes care of your debts and legal fees, you should receive the balance remaining in the original settlement check payout. You can deposit the money into an account of your choosing. If you need advice on how to manage the money received from a settlement check, our law firm can refer you to a financial planning professional.
Should I Agree to a Lump Sum or Structured Settlement?
Understanding your settlement check payout involves choosing how you want to get paid. This means learning about the differences between a structured and a lump sum settlement.
Lump Sum Payout
A lump sum payout allows you to take advantage of liquidity to invest the funds in a manner that matches your financial goals. Although a lump sum settlement is tax-free, you have to pay taxes on any returns on your financial investments. Another advantage of choosing a lump sum settlement is your money is not vulnerable to future inflationary periods.
A structured settlement does not provide you with all your money at once, which means you do not have the legal discretion to invest the funds. However, a qualified structured settlement broker structures a qualified asset such as annuity to match your current and future financial needs, as well as the financial needs of your family.
You also should consider your money management skills and your long-term financial goals. A structured settlement allows you to budget your money because you receive payments according to a schedule. For example, if you receive money on a monthly basis, you can budget your settlement funds to pay for monthly expenses like car and mortgage payments. However, a structured settlement puts your money at risk for future periods of inflation.
Meet With a Personal Injury Attorney From Morgan & Morgan
The clock started ticking on your personal injury claim on the day you suffered one or more injuries. By working with an experienced personal injury lawyer, you file a civil lawsuit before the deadline established by your state. If you decide to negotiate a settlement before filing a civil lawsuit, the clock continues to tick on your claim.
The team of personal injury attorneys at Morgan & Morgan understands the importance of knowing when to negotiate and how to negotiate effectively with the clock ticking on your civil lawsuit. If we do not anticipate any progress during negotiations and your lawsuit is reaching towards the end of the statute of limitations, then we might recommend moving forward with the trial phase.
You can get a better understanding of your settlement check payout by meeting with one of our state-licensed personal injury lawyers. Schedule a free case evaluation today to determine whether negotiating a settlement is in your best legal and financial interests.