Our North Carolina workers’ compensation lawyers have extensive experience negotiating settlements with insurance companies. Workers’ compensation settlements come in two main forms: a structured settlement and a lump sum settlement.
When clients ask us which option is better, we explain that both options have pros and cons. This article will provide an in-depth analysis of these two types of settlements.
Workers Compensation Benefits
The North Carolina Workers’ Compensation Act, Chapter 97 of the NC General Statutes, governs workers’ compensation claims. If an employee sustains an injury at work, they may be eligible for workers’ compensation benefits.
What Is a Structured Settlement?
A structured settlement entails the injured worker receiving their compensation benefits over a specified period. The frequency of these payments can be weekly, monthly, or annually, contingent on the case specifics and the injured worker’s requirements.
Advantages
- Consistent Income Stream: Structured settlements offer a consistent income stream over time, which can be advantageous for workers who cannot return to work due to their injuries.
- Tax Benefits: Generally, the payments from structured settlements are tax-free, offering a financial benefit to the injured worker.
Disadvantages
- Inflation Risk: The value of the payments may diminish over time due to inflation.
- Limited Flexibility: Once set, the payment schedule is fixed and cannot be altered.
A Closer Look at Lump Sum Settlements
A lump sum settlement involves the injured worker receiving their entire compensation benefit in one go, rather than spread out over time.
Advantages
- Immediate Access to Funds: Workers have immediate access to their funds, which can be crucial for covering medical bills and other injury-related expenses.
- Investment Opportunities: Workers have the opportunity to invest their settlement, potentially increasing its value over time.
Disadvantages
- Spending Risks: Without proper financial planning, there is a risk that the worker may spend their settlement too quickly.
- Tax Implications: Depending on the case specifics, some or all of the lump sum settlement may be subject to taxes.
What to Consider When Choosing a Settlement Type
Deciding between a lump sum and a structured settlement is a significant decision that can have long-term implications for an injured worker’s financial health and stability. It’s crucial to consider several factors before making this decision.
Immediate and Future Financial Needs
Evaluate your immediate and future financial needs. If you have substantial immediate expenses, a lump sum might be more beneficial. However, if you need a steady income over a long period, a structured settlement would be more suitable.
Financial Management Skills
Consider your ability to manage a large sum of money. If you’re not confident in your ability to manage and invest a lump sum responsibly, a structured settlement can provide financial stability.
Impact on Other Benefits
Understand the potential impact of the settlement on your eligibility for other benefits such as SSDI or Medicaid. The North Carolina Workers’ Compensation Act (WC Act), Chapter 97 of the NC General Statutes, governs claims for compensation for injuries arising out of employment. This act also outlines how settlements can impact other benefits.
Tax Implications
Consider the tax implications of both options. While the income from structured settlements is typically tax-free, the interest earned on a lump sum settlement is taxable.
Professional Guidance
Given the complexity of these issues, it’s highly recommended to consult with legal and financial professionals before making this decision. A lawyer can help you understand the legal aspects of the settlement, while a financial advisor can guide you in managing your funds effectively.
Types Of Workers Compensation Settlements
In North Carolina, there are several types of workers’ comp settlements: compromise settlement agreements, Form 26A settlements, and Form 21 settlements. Each type has its own set of rules and regulations as outlined by the North Carolina Industrial Commission’s Ratings Guide and the schedule of injuries in the North Carolina Workers’ Compensation Act.
An experienced workers’ Comp lawyer can explain the legal implications of the different types of settlements.
Call Our North Carolina Workers Comp Lawyers Today
There’s no one-size-fits-all answer to whether a lump sum or structured settlement is better. The best choice depends on the individual’s personal needs, financial circumstances, and the specifics of their case.
The decision between a structured settlement and a lump sum settlement is significant and can have long-term financial implications for injured workers. It’s crucial to talk with an experienced North Carolina workers’ compensation attorney about your case.
Our offices can be reached at 919-328-2336.
Leave a Reply