Personal injury lawyers spend long hours researching, depositions, trial preparation, and communicating with defense counsel. This all leads to successful mediation or, in certain cases, a trial verdict. The victim’s future earnings potential, pain and suffering, as well as lost wages, will all be calculated and discussed. Final decisions must be made quickly in order to change the client’s future.

These final decisions are crucial and irrevocable. They can also prove overwhelming and cumbersome if you’re focusing on the client’s long-term welfare. It is important to ask yourself, “What does it mean for a client to receive a lump sum settlement, a structured settlement, or a combination?” Each case of traumatic injury is different, but there are some common characteristics to be aware of when evaluating the various strategies available. These are the pros/cons that must be considered when making a financial strategy decision. Let’s look at lump-sum payouts and structured settlements. These are the important considerations to consider when dealing with such a complex process.


Structured settlements are an annuity-based product that an insurance company offers. They are often tailored to the cash flow needs of beneficiaries. There are many options available to deal with even the most complicated situations during the “crafting” stage. If they are properly executed, they can distribute tax-free income to a beneficiary, usually the plaintiff in a personal or wrongful death lawsuit, on a regular basis, usually monthly. These structures can provide a steady, predictable, and possibly inflation-adjusted stream of income to your client. These structures can be used to meet the current income needs of the beneficiary.

Sell Annuity Payment: Lump Sum vs Structured Settlement Payments -| Annuity, Personal financial planning, Sum
Analysis of Structured Settlements

The annuity payment structure has been set in stone and cannot be modified or accessed outside of the regular payments. This can become problematic if you have additional financial needs or unforeseen financial requirements. This could cause delays in servicing or cash flow problems that were not anticipated when the original strategy was created. Companies can purchase structured payments from clients, and offer a one-time payment in return. However, these buyouts are often disadvantageous as they usually pay pennies per dollar and significantly reduce the settlement’s value.

Structured settlements may not cover unexpected spending. However, they have a protective nature built in that can help someone with spending difficulties or those who are worried about their family members who might be interested in a check they don’t deserve. The client has a limited amount of money available at any given time because the dollars are paid out regularly. The principal is indefinitely locked up. Structured settlements are for clients who have difficulty saying no or might be influenced by others that may not be in their best interest. They limit the funds that can be accessed and prevent clients from spending too quickly. Once the settlement has been executed, the downside is that the beneficiary does not have any flexibility or liquidity.

Annuity settlements can also have tax benefits. Regular settlement payments are not subject to federal or state taxes, as stated above. It is important to remember that in most cases, neither the attorney nor client are in constructive receipt of settlement funds before they are placed in a structured settlement agreement. This will allow for the best income tax treatment. The funds should be transferred directly from the defense to the sponsoring insurance company. At the time of the structured settlement, the payment amount, the timing of payments, and the rate of return are locked in. This is why it is important to do your due diligence. Structures can be used with Special Needs Trusts to help clients who use trust formats. However, it is important to take care during setup so that the structured payouts don’t affect the plaintiff’s eligibility.


A lump sum payout is, however, exactly what it sounds like: cash, paid in full to your client after settlement negotiations have concluded or after a successful final verdict. Your client is free to use the funds as they need them, both for future and known needs. The funds may be kept within the framework of a Special Needs Trust. This trust might have restrictions on access or ownership.

Clients and attorneys can be overwhelmed by the thought of large amounts of cash in trust. Engaging a trusted advisor to help with the negotiation process can ease fears and bring critical insight to the decision-making process. The first step to prudent wealth management is developing a strategic investment plan that takes into account the client’s holistic needs. A broadly diversified portfolio, which can include monthly payments, can be created to help meet current financial obligations, preserve assets, and grow the principal balance.

A wide range of investment strategies is available to suit the individual needs of investors. These strategies can be tailored to suit the financial goals of clients with the help of trusted financial advisors. They can be tailored to provide liquidity, tax-exempt income and combat inflation, as well as growing the principal to meet long-term needs. The asset allocation of money is the most important component of a lump-sum portfolio’s construction. This means that the principal should be invested in key sectors such as stocks, bonds exempt from tax, annuities, and alternatives, as well as real estate. There is a risk associated with investing. Clients should carefully consider how to preserve and protect their assets, balance growth, and optimize tax structures.

Lump-sum settlements allow your client’s unlimited access to their money. While this can be beneficial for unexpected medical expenses and other needs, it can also prove to be problematic if your client is having trouble controlling their spending or if there are extended family members and friends waiting to take your client’s settlement money. Trusted financial advisors can also be helpful in this area. They will warn you against reckless or unwise gifting and spending. Even with these protections, clients retain complete control over their assets unless they are placed in a trust (special need or otherwise) with a strong trustee.

We have found that most clients benefit from a combination lump-sum portfolio and structured annuity. We also understand that every client is different. A team approach can be used to help each client (client, attorney and financial advisor, tax advisor, structured annuity provider). This will allow both the attorneys and the clients to decide the best financial course of action. It will also assist the beneficiary in securing a financially secure future.

Good Question: Powerball, Take The Lump Sum Or Annuity? – YouTube

Contact us

Give us a call or send us an email to run your scenario by us. The consultation is free, and the results are priceless.


Phone: 619-363-3050