How to structure a settlement to maximize payout
Most personal injury cases are settled before going to trial. A settlement is an agreement between the plaintiff and the defendant to resolve a disputed claim. The structured settlement payout is usually in the form of a lump sum payment, but can also be structured as a periodic payment. There are many factors to consider when structuring a settlement, including the nature of the injury, the expected future costs of the injury, the defendant’s ability to pay, and the plaintiff’s ability to pay the costs of going to trial.
The first step in structuring a settlement is to calculate the present value of the future damages. This means estimating the future costs of the injury, including medical expenses, lost wages, and pain and suffering. The present value is the lump sum that would be required today to cover all of the future costs. For example, if the future medical expenses are estimated to be $100,000, the present value would be $100,000 multiplied by the discount rate. The discount rate is the rate of return that could be earned on an investment with the same risk as the future damages. For example, if the discount rate is 5%, the present value of the future medical expenses would be $100,000 multiplied by 0.05, or $5,000.
The next step is to determine the defendant’s ability to pay. This includes considering the defendant’s financial resources, as well as any insurance coverage that may be available. For example, if the defendant has a limited income and few assets, the plaintiff may want to structure the settlement as a periodic payment. This would ensure that the plaintiff receives some compensation, even if the defendant is unable to pay the full amount owed.
The final step is to consider the plaintiff’s ability to pay the costs of going to trial. This includes the costs of hiring an attorney, as well as any expert witnesses that may be necessary. If the plaintiff does not have the financial resources to cover these costs, he or she may want to accept a lower settlement amount in order to avoid going into debt.
When structuring a settlement, it is important to consider all of the factors listed above. By doing so, you can maximize the amount of compensation you receive, while also ensuring that you are able to pay the costs of going to trial.
Another important factor to consider when structuring a settlement is the statute of limitations. This is the amount of time that the plaintiff has to file a lawsuit. If the plaintiff does not file a lawsuit within the statute of limitations, he or she will be unable to recover any damages. The statute of limitations varies from state to state, so it is important to consult with an attorney to determine the applicable time period.
In some cases, the plaintiff may want to consider accepting a lower settlement amount in order to avoid going to trial. This is because the costs of going to trial can be significant, and there is no guarantee that the plaintiff will win. If the plaintiff does win, he or she may be awarded a higher amount than the settlement offer, but this is not always the case.
It is also important to consider the tax implications of the settlement. If the settlement is in the form of a lump sum payment, the plaintiff will be responsible for paying taxes on the amount of the payment. This is something that should be discussed with an accountant or tax advisor before accepting any settlement offer.
When structuring a settlement, there are many factors to consider. By taking the time to understand all of the options, you can maximize the amount of compensation you receive.