If you’ve driven through Orlando, you’ve probably seen the countless billboards boasting jaw-dropping personal injury settlements—”$500,000! $1 MILLION!” But here’s the catch: you don’t actually walk away with all that money. Those giant numbers are a bit misleading if you don’t understand how personal injury settlements are paid out. So, before you start planning your dream vacation with your settlement, let’s break down how the money really gets distributed.
Where Does the Money Go Before You Get Paid?
When you win a personal injury settlement, you’re not the only one with a stake in the money. Several deductions must be made before you receive your portion. Here’s what gets paid out first:
- Medical Bills & Liens – Any outstanding medical bills related to your injury must be paid. Hospitals, doctors, and insurance companies may have placed liens on your settlement, meaning they get reimbursed before you do. This is required in personal injury cases.
- Legal Costs & Expenses – There may be other legal expenses, such as filing fees, expert witness fees, depositions, and other case-related expenses that are deducted from the settlement amount. Our attorney at Chad Barr Law will always discuss these up front and make you aware of why they might be needed for your case.
- Attorney’s Fees – Personal injury lawyers in Florida typically work on a contingency fee basis, which is great because you pay nothing upfront – and only pay if we win your case. This also means that when we win your case, our fee is deducted from the settlement amount. In most cases, the attorney fee is 33.33% – unless your case goes to trial, then the fee is 40%.
Once all these obligations are satisfied, the remaining balance is yours to keep.
Lump Sum vs. Structured Settlements
After deductions, you’ll receive your portion of the settlement. But how you receive it depends on the payment structure:
- Lump Sum Payment – You get the entire amount at once after deductions. This is the most common payout method.
- Structured Settlement – Instead of one large payment, your settlement is divided into scheduled payments over time. This option can help with financial planning, ensuring a steady income rather than a single windfall. Structured settlements are required in cases where the injured person is under eighteen – so make sure your lawyer has experienced with minor settlements, so they have the court agree to the settlement as quickly as possible. Chad Barr Law has handled countless minor settlements and has dedicated financial professionals to advise and assist in the process.
Are Personal Injury Settlements Taxed?
One of the most common questions injury victims ask is whether their settlement is taxable. As we are not tax experts, we always advise that you contact your accountant for tax questions. We will say that in most cases, compensation for physical injuries or sickness is not taxable under federal or Florida state law. Link to IRS information. This includes medical expenses, pain and suffering, and lost wages directly tied to the injury. However, if your settlement includes punitive damages or interest, those amounts may be subject to taxation. Consulting with a tax professional can help clarify how your specific settlement may be affected.
Getting Financial Help Before Your Settlement Arrives
Personal injury cases can take months—or even years—to settle. Sometimes it is not in the best interest of the client to settle quickly. In the meantime, bills don’t stop. That’s why many personal injury attorneys work with funding companies that provide pre-settlement funding. This is essentially a cash advance against your future settlement, helping you cover living expenses and medical costs while your case is still pending.
However, these advances come with high interest rates, so it’s crucial that your attorney discuss the pros and cons before taking out a pre-settlement loan.
Conclusion
While those billboard settlements might make it seem like you’re about to hit the jackpot, the reality is more complex. Understanding how personal injury settlements are paid out ensures you’re prepared for what happens when your case is resolved. Whether you receive a lump sum or structured payments, working with an experienced Orlando personal injury lawyer ensures that you maximize your compensation and manage your financial obligations wisely.
If you’ve been injured and need legal guidance, contact Chad Barr Law today for a free consultation to discuss your case and explore your settlement options. Our lead Personal Injury Attorney, Olivia H. Miller, has the experience that will bring you confidence in your case. Her trial experience means she will fight for you in court if a settlement can’t be agreed upon. Our clients come to us in need and leave as family.
Learn more about Chad Barr Law and our Personal Injury Practice Area.
