What Happens After Getting A Personal Injury Settlement?

Winning a personal injury settlement is a significant relief after a long legal battle. According to the Bureau of Justice Statistics, most personal injury cases are settled before reaching trial, which makes settlements a common outcome in civil litigation. However, once a settlement is reached, the legal and financial processes are not quite over. It’s essential to understand the steps involved in receiving your settlement, which include signing a settlement agreement, resolving liens, and ensuring that tax obligations are addressed. In this blog, we outline the steps that occur after a settlement is reached and help you navigate the post-settlement process smoothly and effectively.

The Post-Settlement Process Explained

Once you’ve won your personal injury settlement, several key steps must be completed before you receive your net settlement money. This process includes signing a settlement agreement, negotiating medical liens, and ensuring tax compliance. Understanding each step will help you manage the complexities of the post-settlement process.

Settlement Agreement and Court Approval

The first step is signing the settlement agreement, which officially resolves the dispute and releases the defendant from future liability. In some cases, especially those involving minors or incapacitated individuals, court approval may be required to ensure that the settlement is fair and in the plaintiff’s best interests.

Receiving Your Settlement Payment

Once the agreement is signed, the settlement payment is processed. Typically, settlements are paid as a lump sum, though some may be structured to provide periodic payments. Your attorney will ensure the funds are deposited into an escrow or trust account controlled by the law firm in order to handle deductions and obligations.

Deductions Before You Receive Your Settlement

Before your settlement is distributed to you, several deductions will be made:

Attorney’s Fees: Attorneys usually work on a contingency fee basis, meaning they take a percentage of the total settlement.
Court Costs and Expenses: Filing fees, depositions, and other costs will also be deducted.
Medical Liens: Healthcare providers, Medicare, Medicaid, or private insurers may have a claim or lien on your settlement to recover costs of medical treatment or medical bills paid on your behalf.

Medical Liens and Their Impact

Medical liens can significantly reduce your final net settlement. These liens are legal claims by medical providers or insurers to cover medical expenses incurred from treating your injury. Your attorney will negotiate these liens to ensure you retain as much of your settlement as possible. In cases where Medicare or Medicaid is involved, resolving these liens can take additional time and effort, but is necessary to avoid future complications.

Tax Implications of Personal Injury Settlements

While personal injury settlements intended to compensate for physical injuries are generally not taxable, certain portions may be:

Lost Wages: Compensation for lost income may be taxed as regular income.
Emotional Injuries: Compensation for emotional injuries, such as PTSD, are taxable.
Punitive Damages: Any punitive damages awarded as part of the settlement are taxable.
Interest on the Settlement: Any interest earned on the settlement is taxable.

It is important to consult a tax professional to ensure compliance and proper tax reporting.

Distribution of the Settlement Funds

Once all deductions are made, your attorney will distribute the remaining settlement (called the “net settlement”) to you. In cases of structured settlements, the payments will be distributed over time, providing you with a reliable source of ongoing income.

Timeline for Receiving Your Settlement

Several factors affect how long it will take to receive your settlement, including:

Signing the Settlement Agreement: After both parties sign the agreement, the funds will be processed.
Resolving Medical Liens: Negotiating medical liens can delay final distribution.
Final Disbursement: Once all fees, liens, and expenses are addressed, you will receive your remaining funds.

“Winning a personal injury settlement is a significant achievement, but the process doesn’t end with the settlement itself. Managing the post-settlement process, from handling medical liens to distributing funds, can be complex. At John J. Malm & Associates, we ensure our clients navigate this stage with confidence, maximizing their financial recovery while avoiding common pitfalls.” – John J. Malm, top-rated Illinois personal injury attorney

Planning for the Future After Your Settlement

After receiving your settlement, consider the following for long-term financial security:

Future Medical Expenses: Plan for any ongoing medical needs, such as rehabilitation or therapy.
Financial Planning: Working with a financial advisor ensures your settlement provides long-term financial stability.
Tax Planning: Consult with a tax advisor to address any taxable portions of your settlement.

Contact the Award-Winning Illinois Personal Injury Lawyers at John J. Malm & Associates

At John J. Malm & Associates, with offices in Naperville and St. Charles, we are dedicated to helping our clients manage the post-settlement process. From negotiating liens to distributing settlement funds, we ensure your compensation is handled efficiently and fairly, allowing you to focus on recovery.

If you were injured in an accident, contact us today to for a free consultation to discuss your case and ensure you receive the compensation you deserve.