Haven’t we all asked this question; where on earth does the money go so fast? A few days after pay day and your bank account is not looking so healthy. When it comes to receiving a payment as part of a personal injury settlement in which the payment is to help cover the cost of future treatment or loss of wages, making a decision on which method to receive the payment, i.e. a lump sum or structured payments, may be key to knowing you will have enough money down the road.
Many factors should be considered and this is where the professional help of a personal injury lawyer can prove invaluable. The legal team at Futerman Partners LLP can discuss the advantages and disadvantages of each type of settlement. A financial advisor may also provide insight and guidance. Although a lump sum may sound like a great fix with cash-in-hand satisfaction, we’ve all heard cases of lottery winners who squandered the money.
While lump-sum settlements and structured settlements are tax free, when you invest the money, any income from a structured settlement remains tax-free while that from a lump-sum settlement is subject to taxation.
If you or a family member has won a large sum of money in a lottery or perhaps as part of an inheritance, perhaps you are able to go out and buy that new car or boat. But money paid in a personal injury settlement is a different story entirely. The money must be closely guarded as a means of replacing past and future loss of income and to cover expenses such as rehabilitation and in-home care. It may, in some cases, be the only source of revenue to cover costly medical bills. One other factor to be considered is the age of the victim. If the victim is relatively young and may need a life-time of medical and rehabilitation, a structured settlement plan may be the best option to ensure you have money now and in the future to cover these costs.
Lump sum or structured settlement payments; this is not a decision to be taken lightly. In Canada, once the decision to enter into a structured settlement is made, it cannot be changed. The principal sum is protected.
For more information on this important subject, please call us at Futerman Partners LLP for an initial free consultation. 416-925-4100