The Cycle Attorney Examines the Pros & Cons
I’m not usually one to brag, but in this case, I am going to make an exception. Over the course of my twenty-plus years as a New Jersey motorcycle accident attorney, I have played a role in distributing millions of dollars to my clients, while assisting them in their quest for justice.
In the course of this career, I have found that a structured settlement is one of the most effective methods of payout for these motorcycle accident claims.
They ensure that the award is distributed to the plaintiff in a timely fashion, while protecting the client from some of the pitfalls that present themselves when a large sum of money is awarded in one big payment.
What is a Structured Settlement?
Before we can address the advantages and disadvantages of this type of arrangement, we need to nail down a good working definition of the term.
A structured settlement is an agreement to pay out a large sum of money owed from a lawsuit in regular, periodic installments rather than in one lump sum. They are usually created through the purchase of annuities. The structure of the settlement is to be agreed upon by the parties involved, and the phrase itself refers to how the payments will be distributed (monthly, quarterly, annually, etc.).
Because it often involves a relatively large award, a personal injury claim, such as a motorcycle accident lawsuit is a good candidate for this type of settlement, as are some car accidents, and worker’s compensation settlements.
When you consider the benefits that receiving a large motorcycle accident settlement can bestow – taking care of medical expenses, mitigating lost wages, repairing or replacing your damaged bike – it’s perfectly natural to wonder why one wouldn’t want to just accept a lump sum for their motorcycle accident compensation and get on with their lives.
Call Lee Gaber, Esquire now at 1-888-292-5352 for your free consultation
But when you examine it in detail, a structured settlement offers some very attractive benefits.
Advantages of Structured Settlements
- Tax Advantages – A lump-sum settlement may, under some unique circumstances, be considered income, and is required to be claimed as such on your tax returns. If the plaintiff is not in control of the funds, such as in the case of an annuity, the settlement may be tax-free.
Ask your NJ motorcycle accident attorney for guidance on this. I’m neither an accountant nor a financial advisor, but I have seen the tax ramifications of a variety of types of awards, and I’m happy to share my observations, and help you work through all your options.
- More Difficult for Plaintiff to Waste the Money – Studies show that many plaintiffs who receive a lump sum spend all of the money within five years of the award. A surprising number of them end up on government assistance. And let’s face it: if most of us got a large chunk of change all at once, the temptation to buy a hot new bike or luxury car, or to upsize our homes might be too much to resist. We’re only human after all.
This risk is somewhat mitigated if the award is doled out over a period of months or years, or even for the remainder of the plaintiff’s life. You would not have the same opportunity to blow a huge amount of money on something you might regret later, making it much easier to plan and stick to a reasonable budget, even with the influx of new cash.
- Annuities Managed By Financial Professional – Structured settlements are typically set up as annuities. An annuity must be managed by a financial professional, who will help to ensure that future expenses, including contingencies and other unforeseen demands, are covered with proper financial planning.
- Future-proof – OK, no financial arrangement is guaranteed future-proof. But let’s say your injury is catastrophic, such as a spinal cord injury. Because cutting-edge medical research in this field is always ongoing, there is a chance that a remedy could be discovered. Your settlement can be structured in such a way as to cover unanticipated medical advances that may help to heal your injuries.
- Make Out-of-Court Settlements More Attractive to All Parties – By offering advantages to both defendant and plaintiff, bridging negotiation gaps, or simply bringing both parties to the table, the option of arranging regular payouts may make an out of court settlement more likely.
Generally the person bringing the lawsuit is required to discontinue legal action in exchange for the payment, which is attractive for the defendant. The plaintiff is guaranteed at least some regular income, which is especially helpful in cases of catastrophic or permanent injury.
Disadvantages To Accepting a Structured Settlement
As with any financial arrangement, there are risk factors to consider as well. Because the award is metered out over time, there is less flexibility regarding spending, future expenses, and economic conditions than you would have if you received the payment all at once and could make financial decisions yourself.
In addition, you may feel that you are better qualified to invest the money, as opposed to leaving it up to the manager of the annuity likely to be in charge of the payout. And plaintiffs who retain too much control over the funds may forfeit their tax-exempt status if the IRS gets involved.
An experienced and tenacious New Jersey motorcycle accident lawyer is your best bet for solid advice when it comes to the pros and cons of a structured settlement.
Call Lee Gaber, Esquire now at 1-888-292-5352 for your free consultation – there’s no fee until we win!