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What to Do After Receiving a Personal Injury Settlement 

Posted on May 6, 2024 in Personal Injury

Many personal injury claimants are so focused on the goal of receiving a settlement that they do not think about what will happen next. Your case is not over the moment you are offered a settlement from an insurance company. It is important to take the right steps to effectively protect your legal rights after receiving a settlement offer.

what to do if you receive a settlement offer

Review Your Settlement With an Attorney

Before you take the final step of accepting a personal injury settlement and signing a release of liability waiver – which effectively ends your claim and prevents any further legal action from being taken against the defendant for the same incident or injury – go over it carefully with an attorney.

A Los Angeles personal injury lawyer can review the amount and terms of the settlement to make sure it aligns with your interests. Your attorney will accurately evaluate your damages to check that the settlement adequately compensates you for your injuries and losses. If it does not, your attorney can help you negotiate for a higher amount or take your case to court.

Decide How You Wish to Receive the Money

A settlement can be given to a claimant in the form of a structured settlement or lump sum. It is up to you which type you prefer. A structured settlement means you will be paid small amounts at regular intervals over time, while a lump sum gives you all of the money at once. Both types come with pros and cons that you should discuss with your attorney before signing.

Pay Off Bills and Debts

If you hired a personal injury attorney to represent you, your settlement check will go directly to your lawyer first. If your lawyer represented you under a contingency fee agreement, the law firm will deduct the pre-agreed-upon percentage in attorney’s fees from your settlement. Typically, this fee ranges from 30 to 40 percent.

After deducting attorney’s fees, your lawyer can help you allocate portions of your settlement to pay off various bills you have accumulated throughout your case. Common examples are medical bills, travel and transportation costs, court fees, and daily living expenses. An attorney can help you negotiate your debts down as much as possible before you pay.

Note that if your settlement has any liens against it, your attorney cannot release your check until these debts have been paid. If you have a medical lien from a health care provider that treated you without charging for these services, for example, the lien will need to be paid off. Your lawyer will send you the remaining amount of the settlement with an itemized list of deductions.

Understand Tax Implications

You may owe taxes on part of your personal injury settlement. While the majority of personal injury claim settlement checks issued in California are not subject to taxation, certain damage categories included in your payout may be taxable.

If you were granted punitive damages as a punishment against the defendant, for example, this type of compensation is taxed under state law. If you wrote off your medical expenses as deductions on a previous tax year, you will need to pay taxes on this portion of your settlement, as well.

Plan for Your Future

How far your personal injury settlement goes depends largely on the amount of time you and your attorney spend on financial planning. Your lawyer can help you structure your settlement and allocate the funds in a way that ensures you have what you need and can benefit from the settlement for as long as possible. To learn more about what to do after receiving a personal injury settlement check, contact us for a free consultation with an attorney.