Structured and Lump-Sum Payments in Wrongful Death Lawsuits

The loss of a dear one due to the negligence of another party is a tragic occurrence. However, it is important to hold the negligent party accountable for their actions. One way of doing this is to make sure the at-fault party pays the fair amount of compensation to the survivors and financial dependents of the deceased.

This is possible by bringing a wrongful death claim against the negligent party. When filing a claim like this in Orange County, you will typically need the help of a good wrongful death attorney.

If your wrongful death claim or lawsuit is successful, you typically have the option of receiving the settlement amount as a structured or lump-sum payment. It is important to know what each type of settlement denotes, and what are the pros and cons of each.

What is a Lump-Sum Payment?

A lump-sum payment is a mode of receiving the settlement money in which you receive the whole amount of the settlement in a single go. In other words, you receive the full amount of compensation as a single payment. If you are entitled to $100,000 in damages, you receive the full amount as a single payment from the insurance company.

A lump-sum payment has its pros and cons. The benefits of a lump-sum payment include the following:

  • A lump-sum payment helps you manage various bills that may have been incurred due to wrongful death, such as funeral costs.
  • A lump-sum payment allows you to make major financial decisions such as purchasing a house or starting a business.
  • When you agree on a lump-sum arrangement, you typically have no financial risks as the money is transferred in full to you without any unnecessary delays.

In spite of these benefits, lump-sum payments also come with their disadvantage. These include the following:

  • Quick Spending. Many recipients of large lump-sum payments from personal injury cases tend to spend the money too quickly. As a result, they have nothing left of the settlement money within two to three years.
  • Taxed Profits. If you receive profit or dividends from any investments you make through the lump-sum settlement money, you must pay taxes.

For these reasons, lump-sum payments are not suitable for every wrongful death case. Instead, some plaintiffs are better off seeking a structured payment.

What is a Structured Payment?

In a structured payment, the payout of the settlement amount is scheduled over a longer stretch of time, often several years. For instance, if you are entitled to $10,000,000 in damages, you opt to receive this amount over the course of ten years instead of receiving it all at once. This is known as a structured payment.

If your wrongful death claim is successful, you may want to choose a structured payment for a number of reasons like:

  • Flexibility. You can dictate various aspects of a structured payment. For instance, you can negotiate how often you want to receive payment, what would be the amount of each payment, how long will the payments continue, who will receive the payment if you die before the amount is fulfilled, and so on.
  • Long-Term Support. As noted above, lump-sum payments tend to dissipate quite quickly. In contrast, structured payments are bound to continue for a long time. Such an arrangement is particularly helpful if the payments will go towards financially supporting the family of the deceased.
  • Tax-Free Income. When you receive the settlement amount as a lump sum, you are bound to invest it. The interest or profit from the investment is taxed. In contrast, the payment tranches you receive as a part of a structured payment agreement are completely tax-free.

A structured payment also has its downsides such as:

  • Risk of Insurer Bankruptcy. When you reach an agreement for a structured payment of a large settlement amount, the payment is typically handled by an insurance company. If the insurer goes bankrupt a few years later, your structured payment arrangement comes to an immediate end.

For these reasons, you must weigh the pros and cons of both types of payment methods when finalizing the settlement agreement in a wrongful death claim. Typically, you are better off accepting a lump-sum payment in settlements amounts of up to $150,000. If the amount is greater than this, a structured payment may be a viable option.

Hiring a Reliable Wrongful Death Attorney in Orange County

If you have lost a loved one due to the negligence of another person or entity, we can help you recover the fair amount of damages. Here at the Crockett Law Group, our aim is to help you secure the maximum compensation for your tragic loss. Give us a call today to discuss your claim in a free consultation.

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