The long hard road to getting your personal injury claim resolved has resulted in a settlement check. Instead of taking your claim to trial, your personal injury attorney negotiated a favorable settlement that gets you the compensation you deserve. Instead of waiting months, if not more than a year for compensation, you can get back to work knowing the litigation process worked for you.
Receiving a settlement check relieves the stress and anxiety that often accompanies personal injury litigation. However, you now face a completely different problem, although it is a problem you should enthusiastically embrace.
You need to learn about settlement checks and the best use for them post-accident.
The first thing on your to-do list involves educating yourself about the details of your legal settlement. You must consider several factors before you decide what you plan to do with your funds. Take the time to look well beyond the joy of getting a settlement check by carefully planning for your financial future.
For more than three decades, the personal injury lawyers at Morgan & Morgan have recovered more than $7 billion in monetary damages for our clients. In addition to negotiating favorable settlements for our clients, we also help them understand the entire settlement check process, from describing the steps for receiving a check to providing advice on what to do with the money.
If you suffered an injury caused by the negligence of another party, you deserve to be represented by the highly-rated team of personal injury attorneys at Morgan & Morgan. You also deserve to receive sound financial advice on how to handle your settlement check. Reach out to Morgan & Morgan today to schedule a free case evaluation to discuss your personal injury case.
What Are the Two Types of Settlements?
When your personal injury lawyer negotiates a settlement, you have two options when it comes to receiving compensation. First, you can request a lump-sum payment, which provides you with the entire settlement in one check. Second, you can choose structured payments, which represent a series of payments over time. For example, you can opt for structured payments every month until the balance of your settlement reaches zero.
Getting paid in a lump sum makes sense if you are concerned about inflation taking a bite out of future payments. You receive the entire amount of your settlement, which you can use to make financial investments that negate the impact of inflation. However, you have to pay taxes on any gains generated from your financial investments.
Structured payments allow you to budget for future expenses, such as medical bills and mortgage payments. Although monthly payments are the most popular form of structured settlements, you can choose to get paid every other month, every six months, or one time a year. The downside to structured settlements concerns one or more periods of future inflation.
Your personal injury lawyer can help you learn more about the two types of settlement checks and the best use for them post-accident.
What Are the Steps to Receiving My Settlement check?
Unfortunately, the day your personal injury attorney negotiates a favorable settlement is not the day you receive your check. You must go through a process before you find a settlement check sitting in your mailbox.
After both parties agree on a settlement, you sign a form that releases the defendant from any future legal obligation regarding the injury or injuries linked to your personal injury case. After you sign the release form, the other party’s lawyer sends the document to the proper insurance company.
Issuance of the Settlement Check
After the insurance company receives all the legally required documents, which includes the signed release form, the company must process your settlement check as quickly as possible. However, you might find your settlement check delayed if the insurance company discovers paperwork not signed or signed incorrectly.
Your Lawyer Deposits the Settlement Check
Your personal injury attorney receives the settlement check and then deposits it in a trust or an escrow account until the check clears. Waiting for a settlement check to clear might add a week or more to the time it takes for you to receive your money.
Pay Off Debts
After the settlement check clears, you are legally obligated to pay off a few debts first, before using your money for other types of expenses. This includes erasing all debts associated with your medical care and/or reimbursing Medicaid or Medicare.
Your Attorney Gets Paid
The last step is to pay your personal injury lawyer for providing legal services. Most personal injury attorneys operate on a contingency fee basis, which means clients do not have to pay any upfront legal fees. Lawyers that work on a contingency fee basis take a percentage of settlement checks.
How Do I Create a Plan for My Settlement Check?
Now we arrive at the focus of this article: Settlement checks and the best use for them post-accident. We like to emphasize there is not a cookie-cutter approach to determining how our clients should spend their settlement checks. Nonetheless, we recommend several time-tested financial tips to help you manage your settlement check, with special attention paid to learning about the different income-generating financial investments.
You first think about how long you want the settlement check to last. Then, you follow the following tips to get the most out of your money.
Pay Off Debts
You already know you are legally obligated to take care of debts such as healthcare costs because that is the primary reason for reaching a financial settlement. However, you should follow the same game plan for other debts that include credit card balances and a student loan account. Paying off debts helps you minimize the money spent on high-interest rates.
Establish an Emergency Fund
You might have heard the saying, “Save it for a rainy day,” which refers to planning for a significant financial hit. Whether you need cash to make up for lost wages or money to pay for a much-needed home improvement project, an emergency fund gives you peace of mind knowing you are covered financially.
Pay College Education Expenses
There is another type of rainy day fund and it is one that you should anticipate. It is called covering at least part of the cost of your children’s college education expenses. College costs have outpaced the cost of living index over the past two decades. Saving money now can prevent a huge financial hit years later.
Save for Retirement
You might participate in your employer’s retirement savings program, but that does not mean you should stop saving for retirement. By working with a certified financial planner, you should discover investment options that help you increase your nest egg for retirement. Choosing a lump sum settlement check gives you more money to take advantage of the compounding interest produced with a one-time substantial payment.
Create or Update Your Will
If you have not already, the time has come to create a will. With a settlement check in your hands, you should allocate some of the money to a will or trust. Hiring an estate attorney can help you select the best estate plan for your financial status.
One important word of advice for settlement checks and the best use for them post-accident: Spend your settlement check responsibly. The last thing you want to do is go on a spending spree.
What Are the Key Mistakes to Avoid With My Settlement Check?
Offering advice on how to best use your settlement check can help you optimize your financial resources for years to come. In addition to receiving helpful tips on how to manage your settlement check, you should also follow a few tips to avoid key mistakes.
Do Not Make Quick Decisions
You waited a long time to receive your much-deserved settlement check. Do not let the long wait motivate you into making rash decisions with your financial windfall. Taking your time making financial decisions should help you avoid making costly mistakes. This especially applies to bank pitches for financial products and services.
Avoid Quick Rich Schemes
After you receive your settlement check, you might discover a flurry of messages that land in your spam folder. As you do with other spam messages, hit the “delete all” button to get rid of them permanently. Like a bank, people will try to persuade you to spend your settlement check in ways that do not benefit you financially.
Do Not Become a Lending Machine
You did not win the lottery; you received a settlement check that covers all of the bills related to your personal injury. Friends and family members might come to you with their hands out for a loan, but you are not a bank. Lending money to people you know and care about can turn good relationships into lifelong animosity.
Stay True to Your Financial Values
Never forget what mattered most to you before you came into a substantial amount of money. Maintaining the lifestyle you followed before receiving your settlement check preserves your financial values while ensuring you continue to make decisions that are in your best interest.
Can I Cash the Settlement Check at My Bank?
Yes, you can cash your settlement check at your bank. Legal settlements do not include a clause that forces a party to do business with a certain financial institution. You should know that your bank, like any bank, will put a hold on your settlement check that can last up to seven business days or even longer than that.
If your bank account balance exceeds the amount of the settlement check, your bank might cash your check on the spot. However, few people have that much money lying around a bank account.
Learn More About Settlement Checks and the Best Use for Them Post-Accident
The personal injury attorneys at Morgan & Morgan can reach a legal settlement either before filing a civil lawsuit or during the litigation process. Most legal settlements unfold during the discovery phase of a civil trial. Discovery allows the lawyers representing each party to examine the evidence and interview witnesses. If the evidence and witness accounts prove your claim of negligence, then the other party might agree to a settlement.
Learn more about settlement checks and the best use for them post-accident by scheduling a free case evaluation with a personal injury attorney from Morgan & Morgan.