If you were injured and have successfully been awarded a workers’ compensation or personal injury award, the financial windfall can leave you feeling like you won the lottery, especially if you receive a lump sum settlement. It’s crucial that you do not view this award as a lottery payment, otherwise you can easily find yourself unable to pay medical bills or find suitable work down the road. Below, we explain some of the financial pitfalls associated with an injury award and how to manage a large settlement.
Financial Planning After An Injury Award
If a five- or six-figure settlement recently hit your bank account, you may be intrigued about some financial opportunities that may appear available. However, an injury award is very different from winning the lottery. Your injury award is determined by a number of factors, including but not limited to your disability, current and future medical bills, your ability to maintain gainful employment and your pain and suffering. The award is to help offset a number of future financial obligations and limitations, so you need to be smart with your money so that you have financial security down the road.
Another issue that some people run into following an injury settlement is from friends or family who are looking for a handout. We understand that you want to help your closest friends or family, but again, you need to remember that your award was to help offset current and future medical expenses and employment limitations. Those looking for money may offer great returns on the investment or promise to pay you back later, but you have no financial security if things go south. If you are smart with your money, you’ll have the peace of mind knowing that you’ll have financial security down the road.
So how can you best financial plan after a personal injury award? First, begin by consulting with your lawyer. They have seen mistakes first hand and can offer some personalized tips to help with your situation. Another thing that lawyers can do is to help explain some expected future medical costs. A lawyer works closely with medical professionals and uses their experience with the legal system to develop estimated future expenses to help with their total claim request. For example, if they believe you’ll reasonably have between $30,000 and $50,000 of future medical costs, they can explain how they came up with this estimate and help explain where you can expect some of your award to go down the road.
Remember, full, final and complete settlements award payments for all future medical expenses, so you can’t come back and request more money from the insurance company if you need medical care that was expected or foreseeable at the time of your original settlement. You need to budget for these future expenses. Similarly, if an injury limits your earnings potential, you need to be aware of how your future income can be supplemented appropriately by an award. Both a lawyer or a financial adviser can help with these decisions.
Finally, you can also talk with your lawyer about how a potential award will be paid. Some people can feel overwhelmed by a lump sum offer and can arrange to have smaller regular payments continue for years. Again, you’ll want to talk to your lawyer and your financial adviser to ensure you’re not losing out on significant earnings from interest, but smaller regular payments are also available if you’re uncomfortable managing a large sum all at once.
At the end of the day, it’s important to talk with your injury lawyer and a financial adviser if you are in line for a payday. We want to help set our clients up for financial stability, but this doesn’t happen by accident. For more information, or for additional financial planning resources, reach out to Dean and the team at Margolis Law Firm today.