Let’s say you’re involved in an accident that causes you some type of personal injury. Chances are you’ll go to a personal injury lawyer, file a lawsuit, and proceed from there. If all goes well, you’ll win your settlement. But where does one go from there? What is the procedure for winning a settlement?
The first thing that will happen is choosing the type of settlement you receive. Two choices are typically available: receiving it in one lump sum, or having a more structured settlement where your payments are made to you over time. The choice you make will likely be tied to what you plan on doing with the settlement, what’s going on in your life at the time, and how much you’re actually receiving. It’s important that you don’t blow all of your settlement as soon as you get it, so let’s take a look at what you can do with it.
Before you actually receive the money, it’s important to remember that you’re going to be taxed on for it. Most settlements (especially larger ones with larger sums) are going to be subject to taxes and it can sting when you’re told you will receive a certain amount of money, but then only get a portion of it due to them. Claims that include copyright infringement, breach of contract, back pay, lost profit, or punitive damage are all typically subject to income tax demands, while personal injury settlements are one of the few typically exempt from them.
After you’ve claimed your settlement, you’ll want to pay any fees you owe. Depending on the type of case you’re involved in, you may not have to pay any, but more than likely you’ll have to at least pay your lawyer. Many law offices will actually just take their percentage of the settlement before it gets passed to you, similar to the way taxes are handled. You’ll want to keep this in mind when thinking about other ways you’ll use your settlement.
Make A Plan
Once you’ve determined how much money you’re going to end up with after taxes and other fees, you’ll want to make a plan! Lacking an outline will likely be the downfall of your settlement money, as you’ll spend it faster and on things you don’t need. It’s important to think about how long you want the money to last, and the types of issues that may arise over time that might require you to spend a larger amount of money. For example, if your settlement was from an accident that left you with a serious long-lasting injury, it’s likely that you’re going to be paying medical bills going forward.