When a Nevada personal injury case resolves, the compensation can typically be structured in two ways: a single lump sum payment delivered at the time of settlement, or a structured settlement — a series of payments delivered over time according to a negotiated schedule. Each approach has distinct advantages and disadvantages that depend on the injured person’s age, financial needs, tax situation, and long-term care requirements. Understanding both options helps injury victims in Las Vegas make the most informed decision for their circumstances. Marathon Law Group helps clients evaluate settlement structure options.
Injured in Las Vegas? Call Marathon Law Group at (702) 522-1808 for a free consultation. Our personal injury attorneys work on contingency — you pay nothing unless we win your case.
Lump Sum Settlement — How It Works
A lump sum settlement pays the full agreed settlement amount in a single check at the time the release is signed and the settlement is finalized. After attorney fees and costs are deducted and medical liens are resolved, the net proceeds go directly to the client. The client can then save, invest, spend, or allocate the funds as they see fit, without restriction. Most personal injury settlements in Nevada are structured as lump sums because they are simple, immediate, and flexible.
Structured Settlements — How They Work
A structured settlement is funded by the defendant’s insurer purchasing an annuity from a life insurance company. The annuity pays the injured person according to a negotiated schedule — which can be customized in countless ways: equal monthly payments for 20 years; a combination of an immediate lump sum plus deferred payments; increasing payments over time to account for inflation; payments that begin at a future date (for a child or for anticipated future medical costs); or a single large payment at a specified future date. The scheduled payments are guaranteed by the annuity provider and cannot be accelerated or borrowed against without specific structured settlement factoring transactions (which are often disadvantageous). Structured settlements in personal injury cases are excludable from federal income tax under IRC § 104(a)(2).
Tax Treatment: Personal Injury Settlements Are Generally Tax-Free
An important threshold point: compensation received for physical personal injury (medical expenses, lost wages, pain and suffering, loss of consortium) is excluded from federal gross income under IRC § 104(a)(2), whether received as a lump sum or through a structured settlement. This means that in most personal injury cases, the tax distinction between lump sum and structured settlement is less significant than it might appear — both are generally non-taxable. The tax advantage of structured settlements is most significant in cases involving punitive damages or interest components (which ARE taxable) and in cases involving pre-judgment interest.
When a Structured Settlement Makes Sense
Structured settlements are particularly appropriate in certain circumstances: catastrophic injury cases with large lifetime care costs — a structured settlement with increasing payment streams can be designed to approximate actual care cost escalation over decades; cases involving minors — Nevada courts require court approval of settlements for minor children, and structured settlements funding future educational and care expenses are common in these cases; clients who have difficulty managing large sums — a structured settlement provides a guaranteed income stream that cannot be quickly spent; and cases where the total structured payout (which includes the investment growth of the annuity) exceeds the immediate lump sum value — structured settlements sometimes provide more total dollars paid out because the annuity earns investment return over the payment period.
Contact Marathon Law Group About Your Settlement Structure Options
Marathon Law Group helps Las Vegas injury clients evaluate both lump sum and structured settlement options with full understanding of the tax, financial, and practical implications. Call (702) 522-1808 for a free consultation about your Nevada case.
If you or a loved one has been injured, contact our experienced Las Vegas personal injury attorney at Marathon Law Group. We offer free consultations and only get paid when you win.
For more information about your legal options, visit our Nevada personal injury practice area page or contact us today for a free consultation. You should also be aware of the Nevada personal injury statute of limitations to protect your rights.