How Are Settlements Paid?

iStock_000015879466_LargeWhen you reach a settlement in your case, you probably feel a huge sense of relief. Usually a settlement is faster and cheaper, and generally easier and less stressful than a trial. However, many people do not know how the settlement is actually paid. There are actually several ways a settlement can be paid, such as in lump sum payments, in installments, or other ways. Below is more detailed information on how settlements can be paid.

One way settlements are commonly paid is as“structured settlements.” Plaintiffs usually think think the best way to receive their settlement is all at once as a lump sum. However, structured settlements have their own benefits. Structured settlements are a very common way to deliver large settlement funds to plaintiffs over an extended period of time. Some individuals may prefer this method of payment because it allows the injured party to receive regular payments for several years, or to receive payments over a lifetime. This could be beneficial because it allows the funds to be preserved throughout the time of the plaintiff’s disability. Plaintiffs who receive their settlement as a lump sum often spend the entire thing within five years, and may become dependent on the government for their support. A structured settlement allows more consistent stability for the plaintiff.

One of the biggest benefits of a structured settlement is that this type of payment can provide the plaintiff with a tax benefit. Lump sum settlements are considered income, meaning it must be claimed on tax returns. However, if a plaintiff retains too much control over the structured settlement proceeds, the IRS may look into the situation to decide that the tax break must be forfeited, State laws also ensure that an insurer will continue to cover structure payments even when bankrupt.

Settlements can also be paid as a lump sum, meaning most or all of the settlement fund are paid to the injured party at one time. A lump sum payment can be beneficial because it guarantees the entire amount of thee settlement goes to the intended party. Lump sum settlement payments are usually paid to the plaintiff in the form of a check, though they can also be made into trusts, which support disabled plaintiffs throughout their lives.

It is not uncommon for settlements to combine structured settlement payments with lump sums.

This give the injured party an initial large sum of cash followed by a structured flow of financial support. When a lump sump payment is combined with a structured settlement, it can be used to meet immediate expenses, such as medical bills, rehabilitation costs, and repayment of debts, as well as provide a steady flow of payment for the future.

In large, class action settlements, payment may be made out of a general fund here a claims administrator determines how much each claimant will receive. Receiving payment from a class action settlement may involve simply filling out a an online questionnaire and including contact information. In other, more serious situations, the plaintiff may have to provide evidence of serious injury to receive a larger payment.


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