Managing Your Finances After A Personal Injury Settlement

May 18, 2022 | Blog, Personal Injury

Many factors play a role in determining the amount and terms of a settlement in a personal injury case, from the circumstances of the accident to the severity of the injuries involved to the type of insurance coverage carried by the at-fault party or parties. The resolution might be negotiated over a period of months or handed down by a jury after a few hours of deliberation. Either way, few injured people have a clear idea of what to expect going into a case or give much thought to what they’re going to do with their settlement funds — until the day the check arrives.

It’s easy to feel overwhelmed when you receive your settlement, especially if the sum is larger than the kind of cash you’re used to handling. That may sound like a nice problem to have — but without proper planning, a seemingly substantial amount can be spent all too quickly, leaving you in debt and with unmet, ongoing medical needs. Here are a few steps you can take to help protect your settlement and put it to use in productive ways.


Well before the settlement check is issued, it’s important to have a candid conversation with your attorney about how the amount is to be paid out and what obligations you’re facing that could affect the amount you will receive. Many settlements involve a lump sum, but others are set up as a “structured” settlement, paid out over a period of years. While that option may seem less desirable in the short run, it may have certain long-term advantages, especially in the event of a permanent disability or other medical condition requiring ongoing care.

You should also make sure you understand the costs you have incurred in your case that will be deducted from the settlement, reducing the amount you receive. Most personal injury lawyers operate on a contingency basis and are paid a percentage of your settlement under the fee agreement that you signed. There may be other court costs or outstanding debts, such as unpaid medical bills. Some providers may have filed medical liens against the settlement, an arrangement that allows you to receive treatment without having to pay up front. (In some cases, an experienced personal injury attorney may be able to negotiate the release of a lien for less than the total amount sought.) All of these charges should be explained and taken into consideration before you start planning how you’re going to spend your settlement.


After addressing legal costs and medical debts, it makes sense to consult an accountant or legitimate investment advisor about ways to protect your settlement. One of the first issues to address is potential tax liability. The amounts paid to you as a result of physical injuries you’ve suffered or for damage to your vehicle are, in most cases, not taxable. But if the settlement includes reimbursement for lost wages, that amount is taxable; so are punitive damages or an award for emotional distress that isn’t a direct result of physical injury. In other words, the tax situation could be simple or complex, but it’s worth looking into with a professional’s help.


You’ve paid off Uncle Sam and met your other financial obligations. What do you do with the rest of your money, assuming there’s still something left? The answer is going to be different for every client. For some, it might make sense to stuff money into a retirement account; for others, setting up a college fund for their children might be a bigger priority. Paying off a mortgage or reducing other debts may appeal to those looking for a more carefree lifestyle, while investing in a proven business could make sense for those seeking to change direction.  Whatever you choose to do, here are some common mistakes that financial advisors warn against:

  • Impulse purchases, just because you can temporarily afford them, are almost always a bad idea. Set up a fund for real emergencies but nurture your nest egg, don’t poach it.
  • Be careful about broadcasting the news of your big windfall, as such news could attract scammers and solicitors.
  • Resist the pressure to “help out” relatives or friends with generous loans that they have no means to repay. It’s the fastest way to go broke — and ruin the relationship.
  • Stay clear of any get-rich-quick scheme that promises to double (or triple or quadruple) your money in no time at all. If it sounds too good to be true, it is.


For more than thirty years the attorneys at Franklin D. Azar & Associates have helped thousands of injured people obtain complete and timely compensation for their losses. Our proven track record and expertise have allowed us to grow into the largest personal-injury law firm in Colorado, with offices in Denver, Aurora, Thornton, Fort Collins, Greeley, Grand Junction, Colorado Springs, and Pueblo. If you’ve been injured in a bus, car, truck, or motorcycle accident, you may be entitled to compensation.  Please call the car accident attorneys at FDAzar day or night at 800-716-9032, or contact us here for a free consultation and no-obligation evaluation of your case.