Baxley Maniscalco Attorneys At Law
Personal injury settlements are payments made to compensate a person for injuries or losses suffered as a result of someone else's negligence or wrongdoing.
Settlement payments may be made by the defendant, their insurance company, or other parties involved in the case. Most commonly, settlements will be paid by the at-fault party’s insurance company.
There are several ways in which personal injury settlements may be paid out, including the following.
Lump Sum Payment
A lump sum payment is a single payment made in full at the time of the settlement. This is the most common method of paying out personal injury settlements.
From that lump sum payment, the injured party will have to pay all medical liens and other bills associated with the incident. After satisfying all outstanding liens, the remaining funds may be kept by the injured party as compensation for pain and suffering, lost wages, and other personal losses resulting from the injury.
Structured Settlement
A structured settlement is a payment plan that involves making periodic payments over a set timeframe rather than a single lump sum payment.
Structured settlements may be used in personal injury cases where the injuries are severe or the damages are substantial and may provide a more stable source of income for the plaintiff. An annuity is a financial product that provides a stream of payments over a set timeframe. Annuities may be used as a way to fund structured settlements, providing a secure source of income for the plaintiff.
Structured settlements will typically only be used for cases in which the payout will be a very large one. For instance, it would be unusual to see a $25,000 bodily injury settlement payment be made as a structured settlement. Typically small to moderately sized settlements will be paid as a lump sum.
One exception to this is where the payment is for a minor child. More about this is below.
What Are the Benefits of Using a Structured Settlement?
There are several benefits to using a structured settlement in a personal injury case:
- Tax advantages: Structured settlements are typically tax-free, which means that the injured party does not have to pay taxes on the settlement funds.
- Security: Structured settlements provide a guaranteed stream of income, which can be helpful for individuals who are unable to work or have limited earning potential due to their injuries.
- Customizable: Structured settlements can be customized to meet the specific needs and circumstances of the injured party. Payments can be made regularly (e.g., monthly, quarterly, annually) or can be structured to meet specific financial needs (e.g., payments can be made to cover the cost of medical treatment or education).
- No need to invest: Structured settlements provide a guaranteed stream of income, which means that the injured party does not have to worry about investing the settlement funds. This can be especially beneficial for individuals who are not experienced investors or who lack financial stability.
It is important to consult with an attorney or financial advisor to determine if a structured settlement is the right option for you in your personal injury case.
They can help you evaluate your financial needs and determine the best course of action for managing your settlement funds.
What Are the Drawbacks?
While structured settlements can have several benefits, there are also some potential drawbacks to consider:
- Lack of flexibility: Once the structured settlement is set up, it is difficult to change either the terms or the payment schedule. This can be a problem if the injured party's financial needs change over time.
- Loss of control: With a structured settlement, the injured party does not have direct control over the settlement funds. The payments are made by the insurance company or other financial institution, which can be frustrating.
- Lack of liquidity: Structured settlements do not provide immediate access to the settlement funds. If the injured party has an unexpected financial need or opportunity, they may not be able to access the funds until a later payment is due.
- Potential for reduced value: If the injured party chooses to sell their structured settlement, they may receive a discounted price due to the time value of money.
This means that they may receive less than the full value of the settlement if they sell it before all the payments have been made.
How Are Settlements Paid to Injured Minors?
If you receive a settlement for a minor in Alabama, the funds will typically be placed in an account under the control of the court, a blocked account, or in a structured settlement. This is done to ensure that the funds are used for the benefit of the minor and are not misused or squandered.
In Alabama, a blocked account is a type of bank account that is set up specifically for a minor and is controlled by a guardian or other legal representative. The funds in the account can only be accessed with the approval of the court or the guardian. This type of account is typically used when the minor is expected to receive a large settlement or other financial award.
A structured settlement is a financial arrangement in which a minor receives periodic payments over a set length of time, rather than receiving a lump sum payment. Structured settlements are often used in personal injury cases to provide ongoing financial support for the minor.
In either case, the funds will be used for the benefit of the minor and will be managed by a responsible adult or legal representative. It is important to consult with an attorney or financial advisor to determine the best course of action for managing the funds in a way that is in the best interests of the minor.
When Can a Minor Get Funds Free and Clear?
The age of majority in the state of Alabama is 19 years of age.
Section 26-1-1 Age of majority designated as 19 years.
(a) Any person in this state, at the arrival at the age of 19 years, shall be relieved of his or her disabilities of minority and thereafter shall have the same legal rights and abilities as persons over 21 years of age. No law of this state shall discriminate for or against any person between and including the ages of 19 and 21 years solely on the basis of age.