Personal Injury Settlement FAQs

Personal Injury Settlement FAQs
personal injury settlements frequently asked questions

Often, personal injury claims are settled before they get to court. Below are some of the common questions that personal injury claimants have about settlements in these cases.

Q: What is the difference between a personal injury settlement and a personal injury award?

A: A "settlement" is an amount of money that a plaintiff agrees to accept from a defendant to conclude a case, while an "award" is the amount of compensation that a judge or jury awards to a plaintiff following a successful personal injury trial.

Q: Do I have to pay taxes on my settlement?

A: Typically, the amounts you receive as compensation for non-economic damages (i.e. pain, suffering, disability, impairment and loss of enjoyment of life) are not considered taxable income. Notwithstanding, exceptions may apply, and you should always notify your accountant of any settlement received during a given tax year.

Q: Do I pay my attorney a fee if I settle?

A: Yes. If a settlement or award is received, then your attorney is paid a fee pursuant to the retainer agreement that you signed at the beginning of your case. Personal injury cases are usually handled on a contingency fee basis. This means your lawyer receives a percentage of the money recovered on your behalf. The contingency fee agreement with your attorney should fully explain how the attorney fee is calculated.

Q: What is a lien and how does a lien affect my settlement?

A: A lien is a possessory interest that someone else has on your settlement. In personal injury cases, liens are sometimes asserted by benefits providers and insurance companies who paid for an injured plaintiff's medical treatment. If a lien exists, then the lien holder may be entitled to reimbursement from the proceeds of the plaintiff's settlement. This reduces the plaintiff's share of the settlement in proportion to the amount of the lien.

Q: How long does it take to receive money after my case is settled?

A: Once a settlement is reached between a plaintiff and defendant, a written release is typically entered into. In this document, the plaintiff agrees to release the defendant from all legal claims in exchange for payment of the settlement amount. Payment of the settlement amount is usually made within a short while after plaintiff provides the executed release to the defendant.

Q: Why are trust accounts set up for some personal injury settlements?

A: In some personal injury cases, the injury victim is a minor or someone with a disability that renders them unable to make their own financial decisions. In these situations, someone else, such as a parent or guardian, may be responsible for their financial affairs. A trust account helps to ensure that the settlement funds are used solely for the needs of the injured party.

Q: Why are some personal injury settlements paid out as structured settlements?

A: A structured settlement is a settlement where the money is paid out over time. This arrangement can be beneficial for victims with catastrophic injuries that require life-long medical care and benefits. This arrangement is intended to ensure that settlement funds last for a long period of time, so that medical and other specific needs will continue to be met.