Many plaintiffs might have an idea of how much they should be paid for their injuries. However, understanding how they should get paid is a different story.
Rather than take their case to a trial, injured plaintiffs might instead decide to accept a settlement agreement. Many such agreements may be paid as large, one-time lump sums or structured settlements that are paid over time. Both options have pros and cons, and you should discuss your situation with an attorney to figure out which option is best for you. Alternatively, settlements might not be what works best for your case, and our attorneys can help you pursue a full trial where you can recover the full value of your considerable damages.
Navigating the judicial process after an injury is difficult, and our Pennsylvania personal injury lawyers can help you negotiate a favorable settlement or take your case to court. Contact our attorneys at The Reiff Law Firm for a free case review to get started. Call our offices at (215) 515-9481.
Pros and Cons of Structured Settlements and Lump Sums in Pennsylvania Injury Cases
Accidents and injuries often leave people with painful physical injuries and high bills associated with those injuries. Many cases end in settlement agreements rather than trials in a courtroom, and not all settlements are the same.
Lump sums and structured settlements can be helpful in different ways, but they might also have certain disadvantages. It is possible that a settlement is not the best option for you, and our Philadelphia personal injury attorneys can fight for you and your compensation through a full trial.
The following are just a few considerations to take into account:
- You can invest a lump sum.
- A structured settlement’s fixed income may be challenging.
- Lump sums are flexible.
- You can always convert a structured settlement to a lump sum by selling it later.
- Structured settlements may pay slightly more and have tax advantages.
- People who cannot manage their own finances because of an injury may not be able to handle a lump sum.
Lump Sums
A lump sum settlement is a one-time payment for your injuries and damages., Generally, a lump sum is a fairly large amount of money that is paid all at once.
Money Now
This can be very helpful to plaintiffs with expenses and needs that need to be met immediately. A lump sum also provides plaintiffs with a large amount of liquid capital they can use to pay their expenses, bills, and cover other damages.
Flexibility
Another potential advantage to a lump sum settlement is that you can choose how to spend the money. Since lump sums are often large, many plaintiffs choose to pay off their immediate needs and invest the rest or use it constructively.
In time, that lump sum might grow to something more substantial.
Having the money from a lump sum in your account also means you can spend it on emergency needs, whereas a fixed income from a structured settlement can be a challenge.
Downsides
Lump sum settlements are not perfect, and there are some downsides you should be aware of. For example, lump sums are often smaller than the actual amount of money your case is worth. Many plaintiffs accept lump sums because it is all the defendant can afford to pay, and it is better to get some compensation instead of none.
In many cases, plaintiffs do not want a lump sum that fails to cover all their expenses.
Structured Settlements
Structured settlements are not paid out all at once. Instead, they are paid in regular installments over time until the entire balance of the settlement is eventually paid off.
Often Worth More
One of the biggest advantages of structured settlements is that they tend to be worth more money than lump sums once fully paid.
Transferrable
Additionally, you can sell or transfer your rights to receive payments from a structured settlement. Plaintiffs sometimes sell their rights to receive these payments in exchange for a lump sum from a third party.
Usually, this new lump sum is larger than one the plaintiff would get through a settlement.
Delayed Repayment
The drawback to a structured settlement is that it might take a long time to pay out, depending on how large the overall settlement is. If you have needs or debts that have to be paid off right away, there might not be time to wait for enough money from your structured settlement.
Are Lump Sums or Structured Settlements Preferable to Trials in Pennsylvania Injury Cases?
While lump sum or structured settlements can help plaintiffs get money quickly, they are not always the best option.
Settling May Mean Less Recovery than Trial
Often, the process of settlement negotiations leads to a reduction in your overall compensation.
For example, your case might be worth $100,000, but through settlement negotiations, the defendant agrees to pay you only $75,000. While settlements do help you avoid a potentially lengthy trial, they are not always worth the tradeoff, especially if damages in your case are expected to be significant.
Fixed Income
Many people end up living off of their structured settlement as their only income for years to come. Living on a fixed income can be difficult and may require thrifty living, savings, and less opportunity to invest or grow your money compared to a lump sum.
Tax Benefits
When damages are paid because of a physical injury, they are usually tax-free. However, portions of the benefits might be taxed in some cases.
When you get paid in installments, it keeps your annual income low, while receiving a lump sum might put you into a higher tax bracket that year.
Effect on Other Benefits
Other benefits might count your settlement payments as “income” for various purposes. Receiving too much money at once could hurt your eligibility for certain programs and benefits that require you to have low assets or income, such as the following:
- Social Security Disability benefits
- Medicaid
- SNAP and EBT benefits (“Food Stamps”)
- CHIP health insurance for children
- Affordable Care Act health insurance discounts
- Chapter 7 bankruptcy.
If you accept a lump sum settlement, it might ruin your eligibility while a structured settlement could help you keep your benefits.
Which is Right for Me?
You should take into account your own personal factors when determining which form of settlement to go with:
- Money management – If you are not good with money management and investing, then it may be better to get a hands-off structured settlement than needing to manage your own future funds with a lump sum.
- Health and disabilities – If you are not well enough to manage your finances because of preexisting issues or the injuries you suffered, it may be better to take a structured settlement so you do not have to worry about managing your own finances.
- Current needs – If you need money now for things like housing, cars, or medical costs, then you may have no choice but to take the lump sum settlement now instead of a structured settlement.
- Lifestyle – Being on a fixed income can be hard if you have surprise expenses, if you need to move to better deal with your disability, or if you care for children or older parents/grandparents.
Consult with a Pennsylvania personal injury lawyer before making any decisions, as you only get one chance.
What is Covered in a Settlement?
Regardless of whether you choose a structured settlement or a lump sum settlement, you should be entitled to each of the following damages:
Medical Expenses
These cover both the expenses you already faced as well as the future expenses you will need to pay for down the road to treat any ongoing or long-term injuries. The last thing you want to do is run out of funding by using up your lump sum damages before you need them.
Lost Wages
Lost wage damages should be covered for any periods of work you already missed, as well as any lost earnings or reduction in wages you face going forward because of your injuries. It can be simple enough to set up an ongoing withdrawal from your lump sum account, but a structured settlement takes the extra work out of this.
Pain and Suffering
The damages paid for pain and suffering are there to reimburse you for your hardship and discomfort, now and into the future.
Benefits of Going to Trial Instead
If you are unsure about accepting a settlement, take your case to trial instead.
Potential for Higher Compensation
At trial, the full extent of your claimed damages is at stake. You might be awarded far more compensation if you win than if you settled with the defendant. If your case is worth $100,000, you deserve every penny.
Punitive Damages
In cases where punitive damages are available, you could be awarded a very large sum of money. You should not walk away from all that compensation for a settlement before talking about it with our Pennsylvania personal injury attorneys first.
Punitive damages are not usually available in a settlement at all.
Sense of Justice
Success at a trial can also get you something a settlement cannot: vindication and justice. A jury verdict against the defendant and an official acknowledgment from the court that the defendant is in the wrong can help plaintiffs achieve closure and move on with their lives.
FAQs for Structured Settlements vs. Lump Sum Settlements
What’s the Difference Between a Structured Settlement and a Lump Sum?
A structured settlement is paid in installments – usually monthly. A lump sum is paid all at once.
Can You Change Your Mind Later?
You cannot go back and adjust a settlement later in most cases. However, if you have a structured settlement and decide you want a lump sum instead, there are often options to sell your structured settlement rights to third-party companies.
Are the Amounts Equal?
In some cases, a structured settlement might pay out more money over time. However, sharp investing on your end might allow you to grow your lump sum on your own, making these equal or even making a lump sum better.
If I Accept a Settlement, Can I Go to Trial Later?
A settlement of either type usually requires you to give up any further claims you have against the defendant. This means you cannot decide to go to trial later; you only get one chance at damages.
What is My Case Worth?
Our lawyers can assess your overall damages in a case evaluation, but we cannot estimate the damages without looking at the specific facts of your case and the damages you faced.
Which is Best for Me?
Every case is different, and a lot of the choice depends on what your current needs are. If you need money now, you may prefer a lump sum. If you are bad at managing large amounts of money, a structured settlement may be best.
Can I Get an Advance on a Structured Settlement?
If you run into emergency financial needs and need your structured settlement payment sooner, you may be unable to arrange this. With a lump sum, you can always dip into the money if you face emergency expenses, but with a structured settlement, you may need to depend on payday loans and other potentially risky options.
Can You Pass on a Structured Settlement When You Die?
If you die while receiving a structured settlement, it can often pass on to a loved one or be liquidated so the remaining money can be passed on.
How Long Does it Take to Get a Lump Sum Settlement?
A lump sum settlement is often paid within around 30 days of settlement. The terms of your settlement may give you more details, so check with your lawyer.
Call Our Pennsylvania Personal Injury Attorneys for Help
Lump sums and structured settlements can help you get some of your damages paid for, but taking your case to a trial might help you get the full value of the compensation you truly deserve. Call our Media personal injury lawyers for help now. Call The Reiff Law Firm for a free case review at (215) 515-9481.
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