After an injury, a personal injury settlement is meant to compensate for a number of damages caused by the accident, but sometimes the compensation exceeds the damage costs. In the case this case, a settlement can have a significant impact on the value of your assets. It is important to understand how you will be impacted by a large award, because there are usually measure that must be taken. A personal injury lawyer or Sacramento trust lawyer can help you determine how best to plan for your future following a personal injury settlement. The following are things to consider following a personal injury settlement:
Adjust Financial Documentation
When an accident results in a significant injury, many changes are likely to occur. A victim may be disabled and/or collect large sums of money in a settlement that will alter their previous status. Because these factors directly affect personal income and other assets, these changes must be clearly reflected in any important documents. Necessary expenses and compensation should be adjusted in wills and estate planning documents, as well we any other necessary legal documents.
You must be diligent in reporting everything accurately. Over-reporting may cause your estate to be assessed at a higher value, therefore, raising the federal taxes. Under-reporting can result in serious legal trouble and other complications.
Address Federal and State Taxes
After receiving a significant personal injury settlement award, it’s important to address federal and state estate tax laws. There is currently a federal tax exemption up to $5.49 million. If a settlement exceed this amount, changes are required in order to comply with federal law.
Some states have their own estate taxes, but they vary by state, so you will need to become familiar with the laws where you live. If your state doesn’t have estate taxes, then you will only need to worry about federal estate taxes. If your state does require estate taxes then you may be required to pay both state and federal taxes.
Create an Investment Plan
A personal injury settlement can result in a very large award. It’s important to handle this money wisely. Investing your money can be a beneficial way of protecting your money and even making more. It is highly recommended that you work with a financial adviser to set up an investment plan best fit for you.
Thanks to our friends and contributors from Yee Law Group for their insight into personal injury and estate planning.