There are two types of medical malpractice settlements: structured settlements and lump sum settlements. These represent different ways of organizing payments received by a successful plaintiff. You will want to determine whether you want a structured settlement or a lump sum settlement before you file your medical malpractice claim. Your medical malpractice lawyer will walk you through the process of filing either one, but it is important to know the difference.
A lump sum settlement is what it sounds like - you receive all the money from the lawsuit at one time in a single payment. You will then use this big pot of money to pay any bills that need to be paid at the hospital or as a result of not being able to work. This money will have to last you for the rest of the time that your life is affected by illness or condition caused by the medical malpractice.
With a structured settlement, you receive money gradually to be used to pay for any expenses deemed to have resulted from the medical malpractice. Typically, a large sum of money is initially awarded to pay off outstanding bills, then a smaller sum is given each month to pay for the month's medical bills, living expenses and loss of quality of life. For temporary conditions, a structured settlement has a lifespan equivalent to the standard span of the disease or condition. For permanent condition, a structured settlement may pay for medicine and hospital care for life.
The main advantage of a structured settlement has to do with taxes. For the lump sum settlement, you have to pay taxes on everything. With a structured settlement, different sets of taxes apply to different payments, so you might be able to enjoy significant cash savings in the thousands or tens of thousands of dollars. Structured settlements also offer a greater chance that the plaintiff will engage in sound financial planning rather than simply spend all the money from the settlement at once.
Consult with your medical malpractice attorney to see if a structured settlement is right for you!