When a person is awarded a settlement for a personal injury, wrongful death, or workers' compensation case, they have the option to receive a lump sum payment or a structured settlement payment. Structured settlements provide claimants with a guaranteed revenue stream for at least a period of time. But what are the costs associated with this type of agreement? In most cases, attorney's fees are based on a percentage of the total agreement. This percentage usually ranges from 25% to 40%, and may depend on the type of case.
If an appeal is necessary after going to trial, attorney's fees may increase. When a person first accepts a structured settlement, they are forgoing an immediate cash payment in exchange for regular future payments. This is because the total amount of payments (the payment) is greater than a current global cash payment. However, future money is worth less and less due to inflation.
The crucial number is the current value of the structured settlement, which is the amount of money needed to obtain the future flow of payments taking into account inflation and other factors. In cases where the plaintiff is concerned about their ability to handle a large lump sum payment right away, a structured settlement may be a good solution. You can design structured settlements to provide a large down payment so you can pay past due bills, cancel a mortgage, or purchase needed items, such as a new car. If you agree to take your compensation as a structured settlement, rather than receiving a large amount from the plaintiff, you will receive periodic payments over a fixed number of years.
However, even in those relatively few cases where a structured settlement annuity makes sense, there are hidden costs and deceptive marketing practices used by liability insurers and life insurance annuity providers. New York law requires full disclosure regarding the cost of the structured settlement annuity; however, the defendant almost always ignores this law and fails to provide the injury victim with an affidavit disclosing the cost of the annuity. The decision to use a structured settlement must be made before finalizing the settlement agreement. You and the defendant (with the help of your lawyer) will ultimately decide how long you will receive the payments and how much they will be.
Structured settlement recipients cannot own the annuity policy that makes the regular payments, assign the payments to another person, change the payment schedule, or speed up the money.