Once a personal injury case settles, your client will be eager to wrap up their case so they can start using that money to address their financial obligations. Before they can even receive their money, other financial obligations must be met, including satisfying liens and legal fees and costs. After your client receives their personal injury settlement, court judgment, or inheritance, it’s critical that a plan is in place for preserving those funds.
Settlement planning is a comprehensive tool that allows personal injury victims to manage settlement funds responsibly. Help your clients use their money wisely by advising them of a settlement management trust. A settlement planner will provide your client with a few options for managing their funds.
The Lump Sum Option
Many of your clients may opt to take their settlement in the form of a cash lump sum. Naturally, they may want their cash right away. However, there are few things they should understand first. Although a lump sum payment is tax-free initially, if the money is invested, your client is liable for taxes on money earned from that investment. Your client must also be prepared to manage a large sum of money. If they do not have prudent spending and saving habits or understand the legalities of their settlement, their funds will not last very long.
The Structured Settlement Option
Historically, lump sums have been the norm for injury lawsuit damages. A structured settlement is an alternative way to manage a settlement. Injury victims compensated through the use of annuities guarantees future payments that are exempt from federal and state income taxes. A structured settlement is ideal for those who need to ensure that future medical and basic living needs are met. Structured settlements are the preferred method of managing settlement funds because they provide long-term financial stability. Your client will be relieved of the financial pressures associated with expenses such as medical, living needs, long-term rehabilitation, permanent care facility expenses, college tuition, and retirement.
Help Your Client Make the Right Decision
Many injury victims waste their settlements within a few months of recovery, and most spend it all within several years of receiving it. Your client’s future is at stake, help them secure their financial future and receive long-term income with a prudent investment. A settlement planner is highly qualified to answer your questions about structured settlements as well as put together a flexible package that preserves your client’s money for years to come while providing access to money when necessary. For a more in-depth look at structured settlements read our introduction here.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.