If a loved one passes away due to someone else’s negligence, you should always look into filing a wrongful death claim against the responsible party.
The damage that such a loss can have on a family is enormous, so affected parties deserve compensation for their loss. Compared to other civil claim settlements, wrongful death settlements are often very significant in size and scope.
If the person you lost was your family’s primary earner, a wrongful death settlement may be essential to your financial stability.
Because of this, one of the most common questions we get from our clients in wrongful death cases is, How are wrongful death settlements paid out?
There is more than one way that a wrongful death settlement can be paid out. In this piece, we outline those options for you.
What Is in a Wrongful Death Settlement?
As noted, wrongful death settlements differ from other civil settlements in their size and scope. This is particularly true when the deceased individual has a family for which they are the primary source of income.
In such an event, recoverable damages often include:
- Funeral and burial expenses;
- Loss of the deceased individual’s future earnings;
- Loss of employment benefits (often including insurance coverage);
- Retirement contributions; and
- Non economic damages like grief, loss of a loved one, and loss of consortium or companionship.
The combination of these damages often exceeds six figures. For example, the 2014 wrongful death of Eric Garner in New York City led to a payout of $5.9 million for his family.
That doesn’t mean that your wrongful death settlement will end up in the seven-figure range; there was a lot that went into the Eric Garner case that was atypical of wrongful death claims. Still, this figure illustrates the potential enormity of wrongful death claims.
What Options Do I Have for My Wrongful Death Settlement Payout?
Because the potential size of a wrongful death settlement is so great, it is important to consider how that money is paid out.
After all, you want to set yourself up for long-term financial security. Fortunately, there is more than one way that we can structure wrongful death lawsuit payouts.
If you are in the initial phase of filing a wrongful death claim, you should carefully consider how you want to receive your settlement money at the end of the day.
Lump Sum Wrongful Death Lawsuit Payout
Your first option is to take a lump sum payout of your wrongful death settlement. A lump sum payment is just what it sounds like: you receive a one-time lump sum.
The lump sum encompasses the entirety of your settlement, and you can do with it what you wish.
The advantage of a lump sum settlement payout is that you get all the money at once. You can take care of any expensive bills you have and spend, save, or invest your money entirely as you wish.
Ironically, receiving all your money at once can also present a drawback. When people receive a significant sum of money all at once, the temptation to spend the money is always there.
As a result, sometimes people who accept lump sum payments end up spending the money sooner than they anticipated. This, of course, can lead to financial instability and insecurity.
One of the other drawbacks to lump sum settlements is tax-related. For any income generated by the lump sum payment (dividends, capital gains, etc.), you are liable for the related income tax.
Structured Settlement Wrongful Death Lawsuit Payout
The other option is to negotiate a structured settlement in your wrongful death case. With a structured settlement, you receive a specified amount of money at defined intervals.
You can set up your structured settlement so that you receive a certain amount each year, each month, or even every other year. The advantage this provides is long-term financial security.
Many people designate a third party to invest their settlement money for them so that it generates income as it “sits.”
Investment can enhance each of the periodic payments. Even better, the income that the invested money generates is not considered taxable.
Perhaps the biggest disadvantage to structured settlement payouts is their inflexibility. When you set up your structured settlement payouts, you can do so at whatever interval or the amount you want.
However, once the agreement is set, altering it is not easy, and sometimes impossible. Thus, many consider structured settlements risky due to their inflexibility.
What If I Take a Lump Sum and Want Something Different?
People change their minds all the time. It is only human for us to change our viewpoint on something as new circumstances and facts come to light.
Unfortunately, once you receive your lump sum wrongful death payout, you can’t exactly give the money back. The agreement was made and fulfilled, so you really can’t change it.
However, you can still set yourself up with something similar to a structured settlement payout if you choose to do so at a later date.
To do that, you just need to purchase an annuity with your lump sum. You get to decide the terms of the annuity, similar to a structured settlement.
Aren’t Sure Which Direction to Go with Your Wrongful Death Settlement Payout?
If you are planning to file a wrongful death claim and aren’t sure how you want to receive your settlement, we at The Zimmerman Law Firm can help.
We will review your case with you, go over your financial needs and circumstances, and help you make the right decision for you and your family.
Wrongful death claims are always difficult for families, so at The Zimmerman Law Firm, we always take a compassionate approach with our clients.
Our goal is to make sure you get everything you need to set yourself up for the future. That’s why we always have someone available to answer your questions.
If you want to see if we are a good fit for your needs, contact us today for an entirely risk-free consultation. From there, we will help you however we can. Contact us today!