PERSONAL FINANCES |
By Janet Rubin Fields
If you’ve been in an accident and are negotiating a lawsuit settlement, you are literally setting the foundation for your future. The decisions you make today, especially if your injuries are severe, may be the key to your financial security as you get older.
America is experiencing its worst financial crisis in a generation, and the end is not yet firmly in sight. Regardless of what happens next, there is no doubt that global financial uncertainty is everywhere—and while we are unable to predict when the pendulum will swing, settling your case empowers you to control the result and how to manage the proceeds.
So with your settlement looming and the stakes so high, what do you do? For starters, be deliberate. Mediation is the venue that allows you to resolve built-up stress from the accident, prepare for a “new beginning,” and plan for your future financial needs.
In conjunction with a mediation, consult with a financial expert experienced in helping those who have been injured. This provides the necessary knowledge to make an informed decision on whether to settle your case and often a structured settlement can be a tool to enhance the settlement value of your case.
Financial planning is difficult even in the best circumstances and given today’s uncertainties and your need for specialized care, you have little margin for error. Financial experts can help in two ways. First, they can create a detailed projection of your living, medical, and rehabilitative needs. Second, they will have specialized knowledge about federal, state and private benefit programs for which you or a family member may be eligible.
While the cost of medical and rehabilitation care continues to spiral upward at roughly twice the inflation rate, the U.S. stock market is at about the same level it was in 1998—in other words, over 10 years, the annualized after-tax return is approximately zero. This imbalance creates the risk of a shortfall as you get older—and for many accident victims, this may have negative implications.
To minimize this risk, consider allocating funds into a structured settlement.
This option allows you to set up a future payment stream tailored to your own specific needs. You can plan funds for future surgery, rehabilitative care or even equipment replacement such as a new wheelchair. These payments can be guaranteed for a set time or for the rest of your life—or even the life of your spouse or child.
All payments are funded through a life insurance annuity, which means they are backed by multiple layers of state consumer protection regulation. That also means your payments aren’t affected by world events or sudden economic changes.
In addition to the guaranteed income, the federal government makes a structure financially appealing by exempting your payments from taxes on income, interest, dividends and capital gains. Another benefit: If your payments are made irrevocably into a special needs trust, they are not counted against Medicaid and SSI income limits.
Many plaintiffs choose to combine these two recommendations by working with a structured settlement consultant to create their payment stream.
Remember, this is the settlement of your case and the outcome affects your life just as the accident changed your life. Not only is it important to be financially secure for the future, I encourage plaintiffs to enjoy life and set aside a portion of their proceeds for a vacation or whatever else is on their “wish list.”
As an attorney who has mediated hundreds of cases during the past 11 years, I have seen victims of many tragic accidents. What’s almost as tragic is when someone loses his or her one chance for guaranteed security due to poor financial decisions. The result of this, or even from bad timing or things outside their control, can be devastating.
In 2008, Janet Rubin Fields was named one of the “100 Best Attorneys in America” for alternative dispute resolution and a Southern California “Super Lawyer.” She is a mediator in West Los Angeles.
