If you’re going to receive a settlement as the result of a catastrophic injury, it’s normal to feel overwhelmed. You may have questions about what to do with the money. Should you invest it? Should you put it in the bank? How will your government benefits be affected?
First, it’s important to know the tax implications of receiving a settlement. As a taxpayer, any monetary award you receive is assumed to be gross income and is taxable. Fortunately, the Internal Revenue Code permits a taxpayer to avoid paying taxes on any settlement money (aside from punitive damages) received due to personal physical injuries or physical sickness. So, if the money you receive from a settlement is due to a physical injury, sickness, or wrongful death, you will not pay tax on your settlement when you initially receive it.
On the other hand, if you invest your settlement money into a traditional investment vehicle or financial institution, such as a local bank, the proceeds received from your interest bearing account are taxable to you.
Second, if you receive benefits from government programs to help with monthly income, medical services, and other expenses, you will need to comply with the programs’ rules to maintain eligibility. Supplemental Security Income (SSI) and Medicaid are examples of needs-based government programs, so your settlement award may adversely affect your eligibility.
With any settlement, the goal should be to ensure the proceeds are as beneficial as possible for as long as possible. A comprehensive settlement planner can discuss your options with you and come up with a plan that meets your needs and financial goals for the future. If you’re about to receive a settlement, our team is available to answer any questions you have. Feel free to contact Milestone Consulting, LLC at 855-836-2676 or visit us at www.milestoneseventh.com.
About John Bair
John Bair has guided thousands of plaintiffs through the settlement process as co-founder of Milestone Consulting, LLC, a broad-based settlement planning and management firm. Milestone’s approach is comprehensive and future-focused. John’s team has guided thousands of clients by taking the time to understand the complexities of each case. They assess the best outcome and find the path that enables each client to manage their many needs. Read more about Milestone Consulting at http://milestoneseventh.com/.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).