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If you have received a large sum of money in compensation for wrongful death or personal injury, then this reflects your attorney’s success in helping you get the justice and the financial compensation that you deserved.
What is financial compensation for?
Determining the purpose of the monetary compensation helps to determine your tax liability.
- Medical bills: In general, compensation for medical bills is tax-exempt.
- Lost wages: These may or may not be taxed.
- Pain and suffering: These may or may not be taxed.
Know Your Tax Liability
Your personal injury settlement may be tax-free or may be taxed, or maybe only some of it is taxed. One of the most important things to do is to work with your car accident attorney rather than financial advisors. The reason is that financial advisors are not experts on personal injury law and they may not understand how these types of accounts work.
It’s important to understand certain terms. “Compensatory” means that payment is made to compensate the injured party for the injuries sustained, and nothing more. But some people think that “compensatory” means “nontaxable.” It merely means that the damages were intended to compensate the taxpayer for her loss, and that’s it. Therefore, determining your tax liability can’t be made simply by referring to your damages is “compensatory” or “punitive.” However, in a lot of cases compensatory damages, such as lost wages, received due to a personal physical injury are excluded from gross income, with the exception of punitive damages.
What Is a Structured Settlement?
A structured settlement pays out money through periodic regular installments awarded from a legal settlement or your personal injury verdict. You have several options to design your structured settlement so that you can have the money when you need it most. A large initial payment may be a good idea if you have been unable to work for some time and your bills are surmounting. Other structured settlements are designed to increase payments over time, whereas others start high and decrease over time. This latter option may be a good idea if you are expecting your income to increase after recovering and returning to work.
What To Do With Your Settlement
It is a testament to the experience and skill of Fresno car accident attorneys who win their clients lots of money in their personal injury cases. But with that large sum of money comes a lot of responsibility. You want to make wise choices with your settlement.
Create A Will and Trust
You need a will and trust after your car accident settlement has been received. This can protect your family and your money. If money from your lawsuit is put into a special needs trust fund, then the money in the trust will not be counted as income, which means that you can still maintain your eligibility for government benefits. An attorney should be advising you personally on these matters.
You are allowed to use your settlement to get additional training and education, particularly if you want or need to train for a new career as a result of the accident. You may be able to increase your income with your new credentials. Furthering your education is a sound and wise investment with your personal injury settlement.