If you’ve been injured on the job, you may have to decide between a lump sum or a structured workers’ comp settlement. This choice may not seem consequential, but it could have a significant impact on your finances throughout your recovery.
So, what are the pros and cons of a structured workers’ compensation settlement? The pros include financial security, tax exemption, and customization, while the cons include less flexibility, dependency on the payments, and devaluation due to inflation.
If you’ve been offered a workers’ comp settlement, an Atlanta workers’ compensation lawyer can review the terms and make sure you receive the best possible deal.
What Are the Pros and Cons of a Structured Workers’ Comp Payout?
Structured settlements provide compensation through regular payments instead of a single lump sum. Like any financial decision, this option has advantages and disadvantages.
Pros of a Structured Settlement
The benefits of a structured settlement include:
- Financial security: You’ll receive guaranteed payments for years, which can make it easier to cover ongoing medical care, household bills, and rehabilitation costs.
- Budgeting support: Periodic payments can help you avoid spending your settlement too quickly.
- Tax benefits: Structured settlements are generally tax-free, while a lump sum may push you into a higher tax bracket and generate taxable income if invested.
- Customization: Your payments can be designed to cover long-term needs, such as medical costs or lost wages.
Cons of a Structured Settlement
Some of the drawbacks of a structured settlement are:
- Less flexibility: You cannot easily access all your funds at once if unexpected expenses arise.
- Inflation risk: Fixed payments may lose value over time as the cost of living rises.
- No investment control: Unlike with a lump sum, you cannot invest or grow the money on your own terms.
- Dependency: If you need financial independence right away, the gradual payout may feel restrictive.
Do You Get More Money With a Structured Settlement?
No, you don’t necessarily get more money with a structured workers’ comp settlement. The total payout is usually similar to a lump sum, but is disbursed over time.
That said, structured settlements may stretch further because you’re less likely to overspend and could save money on taxes.
Is It Better to Take a Lump Sum or a Structured Settlement?
The answer as to whether it’s better to take a lump sum or a structured settlement will depend on your circumstances. A lump sum may be better if you need immediate funds to cover medical bills or other pressing expenses, while a structured settlement may be better if you need ongoing income to replace lost wages or if you anticipate needing long-term medical care.
A workers’ compensation lawyer can help determine the best choice for you.
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Who Funds a Structured Settlement?
Structured workers’ comp settlements are usually funded by the insurance company responsible for your employer’s workers’ compensation coverage. Instead of paying you directly, the insurer often works with a third-party annuity provider. This provider manages the funds and ensures you receive regular payments according to the terms of your settlement.
How Long Do Structured Settlements Last?
The duration of your structured settlement will depend on the terms of your agreement. Some settlements last a few years, while others provide payments for decades or even for the rest of the worker’s life.
Your payout schedule will depend on factors like:
- The severity of your injury
- Your projected medical needs
- Your age and life expectancy
A lawyer can help ensure your structured settlement lasts long enough to cover your expected expenses.
Can You Get an Advance on a Structured Settlement?
You cannot borrow against your structured settlement, but you may be able to sell part of it to a third-party company in exchange for cash. However, while this provides quick access to funds, it usually comes at a steep price.
Before selling your settlement rights, you should weigh the financial consequences and consult a workers’ comp lawyer.
Do I Have to Pay Taxes on a Structured Settlement?
Most workers’ compensation settlements (whether lump sum or structured) are not taxable under federal or state law. However, exceptions may apply if you invest your settlement funds or receive Social Security benefits on top of them.
Always check with a tax professional before making assumptions about your specific case.
Why Hire a Workers’ Compensation Lawyer?
Deciding between a lump sum and a structured settlement is a high-stakes choice. A workers’ compensation lawyer can:
- Explain your options: A lawyer can break down the financial and legal impact of each choice.
- Negotiate with the insurance company: An attorney can fight for a settlement that reflects your current and future needs.
- Represent you: A lawyer can advocate for you in hearings before the workers’ compensation board and, if necessary, in court.
- File an appeal: If your claim gets denied, an attorney can help you appeal the decision.
Consult a Workers’ Compensation Attorney Today
The terms of your workers’ comp settlement could determine your financial future. A workers’ compensation attorney from John Foy & Associates can explain your options, negotiate a fair payout, and help you avoid costly mistakes.
Schedule a free consultation to discuss your case today.
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