When a personal injury case settles out of court, the plaintiff is usually relieved to get on with his life with compensation for his injuries. Civil litigation may take months or even years to get to the point of settlement. After paying medical liens and legal fees, the plaintiff has a lump sum settlement or a structured settlement that will pay out over time and one big question: Do I have to pay taxes on what I have left?

As with many aspects of American law, the answer is sometimes yes, sometimes no. It all depends on what the settlement money is compensating.

United States Federal law bars any settlement proceeds that are compensation for a physical injury or illness from being included in a person’s taxable income. Because state income taxes are generally based on the Federal taxable income amount, plaintiffs will not pay state taxes on a personal injury settlement, either. Ongoing medical costs, past and future lost wages, and compensation for mental anguish can all be included in the untaxed portion of a settlement, so long as they are the result of a physical condition.

If the settlement is compensation for the effects of a mental condition that is not related to a physical injury, it will be taxed. For example, a plaintiff who is compensated for Posttraumatic Stress Disorder that was triggered by an industrial accident in which she was burned will not pay taxes on her settlement; a plaintiff who is compensated for Posttraumatic Stress Disorder that was triggered by ongoing sexual harassment without a physical injury will pay taxes.

If the settlement is compensation for an injury from breach of contract instead of tort, like negligence, it will be taxed. This is particularly important in cases of employees seeking compensation for injuries sustained after the action of their employer.

In litigation like large pharmaceutical liability cases, the time between filing and final verdict or settlement may be many years. In those cases, it is common for the interest that has accrued or would have accrued on the settlement proceeds to be awarded to the plaintiff. While the compensation amount would not be taxable, the interest would be, even though it arises from a physical injury or illness.

Though it is normally only awarded in cases that do not settle but are instead decided by jury verdict, punitive damages, even as part of a settlement, will be taxed. Punitive damages are not compensation for something the plaintiff lost but rather a punishment for the actions of the defendant.

After receiving settlement proceeds, any taxable income the plaintiff receives from investing the settlement funds will be taxed, though as capital gains, not income. This generally does not apply to structured settlements, where the rate of interest that will be gained over the time that payments are being made is factored into the initial settlement amount.

All of the still-existing proceeds from personal injury settlements are included in a deceased person’s estate for purposes of the Federal estate tax and may be taxed not as income but under succession tax laws. This is only a concern for people who have more than $5 million worth of property at death, though a sizable wrongful death or medical malpractice settlement could cause an estate to easily cross that threshold.

The general rule for whether a personal injury settlement is taxed is that it will not be, so long as the amount is compensation for a plaintiff’s physical injury or illness or from something that comes directly from a physical injury or illness.

Many people have recently suffered injuries and overwhelming medical bills because of an accident that was no fault of their own. Such accidents were caused by the neglectful actions of another party. Many personal injury victims are entitled to monetary compensation that can get them out of their current state of turmoil. However, some of those victims are afraid to schedule a consultation with a personal injury attorney because they are afraid that the attorney will cost them a lot of money. The following contains some information about personal injury cases and their costs.

Accident Victims Can Receive Lump Sum Distributions

First, accident victims need to realize that their cases have high win potential. A judge will deem an offending party guilty if the attorney can prove that the party acted in a neglectful manner. Examples of neglect are texting while driving, improperly training employees, failure to place “wet floor” signs in consumer sight, and failure to keep a dog on leash. Many more instances of neglect exist, and a judge will find the victim eligible to receive compensation in many of those cases. Therefore, visiting an experienced attorney is important so that the person will know how much he or she can collect.

Free Initial Consultation

One of the best qualities of a compassionate and caring personal injury firm is that its lawyers offer free initial consultation. They do not ask the victim for a dime because they understand that accident victims are currently struggling because of their injuries. The attorneys at a reliable firm will schedule a meeting in which they can discuss details with the prospective clients about the case. Hopefully, the attorney can assess the victim’s win potential by the end of the consultation. At that point, the injured person can hire the firm to act on his or her behalf to collect due compensation.

Contingency Representation

Contingency representation is another thing that victims appreciate about personal injury cases. Some attorneys are willing to defer retainer fees until the case ends. The attorney will fight for the client even though that client has not yet submitted a payment. Such representation eases the burden for the victim by removing the pressure associated with waiting for a court case to end. The victim does not have to deal with any added stress that comes from having an extra bill. No-win-no-fee representation takes contingency representation a bit further. This type of representation states that the lawyer will not collect a penny if the victim does not win the case. No-win-no-fee representation does not pose any risk to the victim in the case. Instead it should make the victim feel secure that the attorney will fight hard for compensation.

Percentage of Case Win
Each lawyer has different pricing for contingency representation. Some attorneys charge 25 percent, and other attorneys charge a heftier percentage. The thing to remember is that the victim can relax and allow the attorney to handle everything. The attorney will be responsible for contacting the medical professionals that take care of the patient. The attorney will be responsible for negotiating with the guilty party, as well. Sometimes, parties will negotiate for an out-of-court settlement if they know they are guilty of neglect. Such usually occurs when a large corporation or medical facility is responsible. The attorney’s office will ensure that the client receives payment once it deducts the fees.

Scheduling a Consultation

A victim can schedule a consultation with an attorney about a personal injury case as early as today. The attorney will arrange to meet with the person to find out additional details about the case. From there, the two can discuss the win potential and the type of strategy that the attorney can use to move the case along faster. The victim can agree to hire the attorney at the fee that the attorney suggests.

Not every personal injury claim requires the skills of an experienced attorney. If the injuries are minor, and the damages are minimal, the costs involved in hiring an attorney may not justify using their skills for the low settlement the insurance company is likely to offer.

The Claims Process

For a minimal personal injury claim, the process can be quite simple. Usually, filling out the claim form does not require legal training. There are no complex legal rules or technical language involved. Typically, the claims adjuster working for the insurance company is eager to resolve the case through a quick financial compensation check.

The Compensation System

Based on the type of accident, medical costs and injuries you endured, figuring out how much you need for compensation might be easy. Typically, when an attorney is not present, the insurance company is likely willing to pay for compensation in a very narrow range. This means that they have a preset amount that they are willing to offer to fix any damaged property, and pay for obvious medical problems caused by the accident.

Pain and Suffering

No one will have a better understanding of the injuries, pain and suffering you endured from the accident than you. Because of that, it is important not to be pushed around by an insurance adjuster that is eager to low-ball the settlement. It is essential to understand every aspect of your claim, to ensure that you receive the highest level of financial compensation.

Saving on Attorney Fees

Unless the case is complicated or serious, some personal injury attorneys will offer their negotiation services for an amount that is 10 percent to 25 percent higher than what you could likely acquire on your own. This is often beneficial because they understand the claims process. Attorneys will often handle complex cases involving serious injuries and extensive damage, and charge a recovery fee between 33 percent and 40 percent. In all likelihood, there will be additional “costs” for administrative services including conference calls, photocopies, and copies of court documents.

Settling the Claim

Most personal injury claims never go to trial in front of a judge and jury. Often times, the insurance carrier will offer an acceptable amount at settlement. Because of the cost of filing a lawsuit in taking the case to trial, it is often better to settle out of court for a reasonable amount of money, than to hope for a greater amount that brings with it exorbitant administrative and case-supporting costs.

If you are involved in a vehicle accident, medical malpractice case, slip and fall incident, or other occurrence that caused you injuries, you are likely entitled to financial recovery for your damages. However, exactly how much will your personal injury claim really be worth? The answer involves calculating the damages that your injuries have caused you. This often involves the physical, monetary, emotional and mental aspects that the negligence of another person or entity has cost you.

In a personal injury case, the injured party (the plaintiff) is paid monetary damages by the defendant – the individual responsible for the injuries. The financial compensation can be paid through a negotiated settlement between all the parties, their attorneys and insurance companies. Alternatively, a jury or judge may order the award after a court trial.

Typical Compensatory Damages

In nearly every personal injury case, the injured party is allowed to receive compensatory damages that could include:

• Medical Care – The injured individual is often awarded personal injury damages for all medical treatment, procedures and care associated with the accident or incident. It often includes financial compensation for any future medical and rehabilitative care.

• Income – Often times, the injured party filing a personal injury case has lost a substantial amount of wages or salary due to the downtime after accident or incident. They are often awarded recompense for current and past wages, along with any lost earning capacity in the future.

• Property Loss – If a vehicle, clothing or other personal item was damaged during the accident, the plaintiff is entitled to reimbursement for any necessary repairs, or financial compensation of all the property that was lost.

• Pain & Suffering – The injured party is often entitled to financial recompense because of the mental and emotional distress along with suffering and pain involved in the accident and during the recovery phase.

• Loss of Enjoyment – In serious accidents or extreme medical malpractice cases, the injured party often has a loss of enjoyment, which they are entitled to receive financial compensation. This might be the result of the injuries are so severe that it is impossible to enjoy daily pursuits including exercise, hobbies, or any enjoyable recreational activity.

• Loss of Consortium – Plaintiffs will often seek recompense because of their loss of consortium when their severe accident injury diminishes the relationship between the injured party and their spouse or child.

In some incidences, in an effort to punish the responsible parties, juries will award punitive damages over and above a compensatory damage award.

Attorneys file many different types of personal injury claims on behalf of their clients. A personal injury in terms of the law is any injury caused by the reckless behavior or negligence of another. The negligent or wrongful party could be a person, company, organization, manufacturer, property management firm or other.

Types of Personal Injury

To receive financial compensation, the injured party or their lawyer must be able to prove liability. It often takes significant tenacity and experience of an aggressive attorney that specializes in personal injury cases. They can file a lawsuit on behalf of their client if there is negligence caused by another through:

• Vehicle accident
• Medical malpractice
• Nursing home neglect or abuse
• Premises liability
• Swimming pool accident
• Bicycle accident
• Work-related injuries
• Pedestrian accidents
• Dog bite injuries
• Industrial disease injury
• Slip and fall incidences
• Chemical accidents
• Workers’ compensation
• Wrongful death cases
• Elderly injuries and abuse
• Product defect claims
• Construction site injuries
• Libel/slander/defamation
• and others

Injuries requiring a lawsuit or claim can also be in the form of a personal attack including beatings, muggings, hate crimes, shootings, discrimination, police brutality, child neglect or abuse and others.

Health Care Related Personal Injury

Personal injuries that are health care related can result in functioning organ loss, amputation, crippling medical condition, and even death. In nearly every incident, personal injury cases involving medical professionals often leave the victim with debilitating long-term suffering. Most medical malpractice cases involve any one of the following that include:

• Miscarriages
• Childbirth injuries
• Delayed treatment and procedures
• Misdiagnoses
• Failure to diagnose
• Wrongfully prescribed prescription medications
• Omission of prescribing beneficial medications
• Prescription medication recalls
• Medical device malfunctions
• Fatal side effects of prescription medications
• Nursing home neglect and abuse
• No informed consent for procedures and surgeries
• A breach of maintaining patient privacy of their medical information
• Insurance benefit denial

Toxic Substance Personal Injuries

Workers, neighborhoods, and the public can become a victim of toxic substances that often result in a personal injury case. Many cases involve chronic sickness, organ damage, cancer, and other harmful medical conditions. The toxic substance can include:

• Polluted water
• Radon gas
• Radiation
• Used motor oil
• Inhaled substances
• Road paving materials

Physical and Mental Problems

Victims of negligence often experience a variety of physical problems caused by their injury. These injuries can be from an intentional or negligent act. They include:

• Brain concussions
• Traumatic brain injuries
• Paralysis
• Broken bones
• Back and neck muscular injuries
• Whiplash
• Burns
• Mental and emotional anguish
• Pain and suffering

An experienced attorney can provide legal advice on how to proceed when a victim suffers personal injury through the neglectful action of another.

What Is A Personal Injury?

Any type of physical injury afflicted onto a person’s body can be classified as a personal injury. There are several things that can be placed in the category of personal injury. Road traffic accidents are the most common type of personal injury.

People who have been injured in a car accident that as the result of another negligent driver may be able to file a personal injury claim. Assault claims, product defect accidents and slip and fall accidents are examples of some of the other things that can be classified as a personal injury.

Keep in mind that medical and dental accidents can also be classified as personal injuries. In fact, numerous medical negligence claims are filed each year. If you have suffered a personal injury, then it is best for you to contact a personal injury attorney.

What Documents Will I Need To File A Personal Injury Case?

The more information you can provide about the incident, the better. You will need photographs of the accident, medical documents and documents that prove that your injury led to a loss of income. Additionally, if there was a police report filed, then you will need to make sure that you provide it also.

How Much Is My Case Worth?

Because each person’s case is unique, it is hard to give an answer to that question. There are several factors that will determine the amount of money that your case is worth. The severity of your injuries, insurance limits, past medical bills, future medical bills, lost wages, pain and loss of earning capacity are some of the things that will determine how much your case is worth. Your attorney may be able to estimate the value of your case after he or she has gathered all of the important information together.

How Long Will My Case Take?

The amount of time that it takes to resolve a case can vary, depending on a number of factors. Each person’s case is unique, so it is not possible to put a timetable on it. Some cases can resolve in as little a couple of months while other cases can take years to resolve.