A wrongful death claim provides an opportunity for a grieving family to gain a measure of justice and recover financial compensation for their related losses. Once a settlement is reached in a wrongful death claim, the plaintiff has the choice between a structured settlement and a lump sum. Both types come with potential pros and cons that should be carefully considered before choosing.
What Is a Structured Settlement?
A structured settlement makes multiple payments to the plaintiff over time until the full amount of the settlement has been paid. It is a long-term arrangement with the insurance company that has been structured or organized based on the claimant’s financial needs.
With a structured settlement, a claimant can choose his or her desired payment schedule – such as monthly, quarterly or annual payments – from the insurer. Structured settlements are often preferred by families who need a steady, reliable source of income after losing a provider.
Pros of a Structured Settlement
- Provides long-term financial security to beneficiaries
- Offers a source of consistent income after the death of a breadwinner
- Protected by an insurance annuity that ensures funding years after the wrongful death claim ends
- Can potentially increase in value over time due to interest
- Can be customized to account for special costs such as tuition
- Typically tax-free under federal law
Potential Cons
- Can be difficult to change once the settlement arrangement has been signed (limited flexibility)
- Limited access to funds in an emergency or a changing situation
- Can potentially decrease in real value over time due to inflation
What Is a Lump Sum Settlement?
A lump sum settlement means the full amount is paid to the plaintiff at once, in a single large payment that satisfies the insurance company’s obligation. Once the settlement agreement is signed and the insurance company processes the settlement check, the funds will be immediately distributed to eligible beneficiaries to be used however they wish – often to pay for funeral and burial costs, hospital bills, pain and suffering, and lost wages.
Pros of a Lump Sum Settlement
- Immediate access to the full amount of the settlement
- Greater flexibility with how the money can be used
- More compensation available upfront to pay for large expenses
- Freedom to use or invest the money as the family sees fit
Potential Cons
- The possibility of spending too much at once and not having enough for the future
- A lack of long-term financial security without careful planning
- Potential tax liability if any of the money is invested
How Do You Know Which One Is Right for You?
It is important to carefully select how your family will receive a wrongful death settlement after considering all of the potential benefits and drawbacks of each option. The best way to do this is by working with an experienced wrongful death attorney in New Mexico who can guide your family through the process.
An attorney will work closely with you to understand your family’s situation. Your lawyer will give you customized suggestions and smart solutions based on your current as well as future financial needs. Your lawyer may suggest a hybrid plan, for example, which can use the best of both options to satisfy your present and foreseeable needs.
To discuss which option is best for your family, a structured settlement vs. lump sum, contact us today for a free wrongful death case review.