Your personal injury case has come to an end. The papers have been signed. Your attorney’s fees and medical liens have been paid. The settlement check is finally in your hand. Now what?
While your settlement might seem like a lot of money now, it can disappear quickly if you just start spending it arbitrarily. To protect your settlement and maximize its value, you need a plan—a general idea of how much to spend (and on what); how much to save; and how much to invest. This is the only way to ensure that your settlement money will be there for you when you need it.
If you don’t have a plan in place now, don’t worry. It’s not too late, and moreover, it doesn’t have to be complicated. Initially, all it requires is some time and thought. For example, all the following steps can help you formulate a plan to protect and manage your personal injury settlement:
1. PAUSE.
Don’t be in a hurry to spend your settlement check. Put your settlement money into a low-interest, low-risk account, where it will be safe. Then, take a breath. Your settlement likely marks the end of a long legal and medical journey that was physically and emotionally exhausting. As much as realistically possible, take some time to decompress before you make any financial decisions. Use this time to objectively assess your situation and options.
2. DEVELOP THE PROPER MINDSET.
Some personal injury plaintiffs think of their settlement as a “windfall” or “found money.” This mindset leads to frivolous spending and rapid dissipation of any settlement. Don’t make this mistake. Instead, think of your settlement as “earned money.” You were injured due to another person’s carelessness, and you persevered through medical treatments and the litigation process to earn a settlement. Spend your settlement money as you would any other hard-earned money.
3. IDENTIFY YOUR GOALS.
Your goals will depend, in part, on the size of your settlement and on whether you (or your injured loved one) are able to work in the same capacity as before the injury-accident. Your goals might be, for example:
• To pay for ongoing medical expenses or accommodations for as long as you need to, without worry;
• To ensure that your children are cared for;
• To pay off debt;
• To invest in education or retraining; or
• To have the peace of mind of a rainy-day fund.
Whatever your goals are, they will guide your financial planning and spending decisions.
4. ASSESS YOUR MONTHLY EXPENSES AND CREATE A BUDGET.
You may never have created a budget before your injury and settlement. You may think a budget is the last thing you need (after all, you have money now). Though it may seem counterintuitive, you probably need a budget now more than ever. If you don’t establish a baseline of your income and expenses, it will be far too easy to lose track of the money that is coming in and going out. The act of creating a budget will help you develop discipline in spending. In addition, by distinguishing “needs” from “wants,” creating a budget gives you a clearer picture of how much is “left over” to meet your larger, long-term goals.
5. REVIEW YOUR INSURANCE COVERAGE.
Review everything from your life and health insurance to your car insurance. How does your change in circumstances impact your insurance needs? Do you need more insurance? Less insurance? What new assets, if any, do you need to protect?
6. REVIEW YOUR WILL AND OTHER “ESTATE PLANNING” DOCUMENTS.
Do you need to update or revise your will or any related trust documents? If you don’t have will, now might be an appropriate time to make one and to think about other “estate planning” matters.
7. GET PROFESSIONAL ADVICE.
You can take all of the steps listed above on your own, but if you never have dealt with these types of issues, you may want to consult with one or more experts, including:
• An insurance specialist.
• An estate planning attorney.
• A tax professional (e.g., a CPA or tax attorney).
• Even though your personal injury settlement is not taxable as income, any income you earn from investing your settlement money likely would be taxable. To say that the tax code is convoluted and confusing is an understatement. The wisest course of action is to assume that some portion of your settlement will be subject to taxes at some point, and talk to a professional to avoid any unpleasant surprises.
• A financial advisor.
A financial advisor is a professional who understands how money works and can help you make informed financial decisions. A good financial advisor will assess your present situation and offer options to help you maximize the value of your personal injury settlement. One word of caution: all financial advisors are not created equal. Some are highly-educated, well-trained and independent; others are glorified salespersons, pushing the products of a particular investment company. Do your research before you choose a financial advisor.
Michigan Attorneys Committed to Helping People
We have a long track record of helping individuals overcome legal challenges and pursue compensation in civil court. We understand what is required to prevail in a civil lawsuit against a powerful and well-funded doctor or hospital.
Steve comes from the nation’s top law school and has years of experience litigating cases. He’s worked at some of the world’s most respected law firms. Simply put, Steve Crane and Crane Law are not just another run-of-the-mill personal injury law firm that also handles automobile accidents or slip and fall cases. We are a high-powered civil litigation boutique law firm.
If you are advocating for your child or are an adult seeking closure for abuse suffered years ago, Crane Law and Steve Crane have the experience, grit, and compassion to help you obtain justice and maximum compensation. Contact Steve Crane to schedule an appointment today.
To schedule a discrete and confidential consultation about your matter, email or call us at (833) 855-4400.