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Personal injury lawsuits, attorneys, settlements & taxes

Attorneys, Injuries & Lawsuits

Our skilled trial lawyers are adept at handling any type of personal injury or wrongful death suit. We are strong advocates on behalf of our clients and fight hard to secure the compensation we knows they are entitled to collect. All cases are handled on a contingency basis, which means that clients pay nothing unless they win. At TheLawFirm.com, we provide our clients with an open and honest assessment of their case, explore with them the available options, and help them to decide the best path to choose to secure the money damages needed to compensate them for their injuries or loss.

Personal injury cases encompass a wide array of incidents from motor vehicle accidents to slip and fall cases, from workplace injuries to assault and battery. Accidents can happen in bars and restaurants, on the job site, in hospitals or clinics, on the roadways, or even in your own home. When severe personal injuries are inflicted, people find themselves in devastating situations and are often unsure how to proceed or what their options may be. While people may feel hesitant about filing a lawsuit, the financial burden that accident victims and their families face is often overwhelming due to job loss and medical expenses, and recovering compensation for injuries may become a necessity.

Contact TheLawFirm.com immediately if you are suffering from serious personal injury. During your free initial legal consultation, you can explore your options and decide on the best path to choose before it is too late. Our attorneys are experienced litigators and can advise you on the expected outcome of your case. We stand ready to pursue any case to trial to ensure that our clients and their loved ones are able to secure the compensation needed to regain their former quality of life. Contact us today and rest easy knowing you are not alone. matters.

• SETTLEMENT: 2009 – Assault causing head trauma – California – $1 Million dollar jury verdict. • SETTLEMENT: 2009 – Auto Accident – California – $766,666 collected. • SETTLEMENT: 2009 – Auto Accident – California – $215,000 collected. • SETTLEMENT: 2009 – Employment Class Action – California – $6.2 Million Dollars collected. • SETTLEMENT: 2010 – Auto Accident causing death case – California – $3 Million dollars collected. • SETTLEMENT: 2010 – Defective baby product – California – $1.25 Million dollars collected. • SETTLEMENT: 2010 – Pharmaceutical Drug action – Nationwide – $1.7 Million Dollars collected. • SETTLEMENT: 2011 – Employment Class Action – New Jersey – $2.5 Million Dollars collected. • SETTLEMENT: 2011 – Auto/Bicycle Accident – California – $200,000 collected. 2011 – Auto Accident – California – $510,000 collected.

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Structured Settlements

One of the questions asked to the attorneys at TheLawFirm.com is ‘will this settlement negatively affect my personal finances’? This question is often asked by people who are applying for student aid, are getting a divorce or are on social security. In other words, it is common for people on a fixed income or going though a major life event to worry that the settlement money will negatively affect their finances.

The first piece of advice we give people is to talk to your accountant or personal financial advisor. We are usually not familiar enough with your personal finances to give you solid advice. However, many of the people who are most worried about how this money will affect them often don’t have such a person. This is where we try to offer our clients the best advice we can.

As strange as it may sound, it is important to know that a large settlement can negatively impact your financial life. This is especially true if you are generally relying on loans or income that are ‘means tested’ (such as a student loan for example). Obviously, if your access to money dramatically increases, this may cause disruption. The first step if to figure out if whoever you are worried about cares about the settlement. Remember that the point of this money is to compensate you. In other words, the money is supposed to help put you back where you were before you were injured. Thus, depending on who the money may not have a large impact on your other income.

If you discover that the sudden ‘income’ will impact you, one possible solution is a structured settlement. This is where the settlement is paid in installments over time rather than in a single lump sum. Often the structured settlement will be created through the purchase of one or more annuities, which are supposed to guarantee the future payments.

A structured settlement can provide for payment in any schedule the parties choose. For example, the settlement may be paid in annual installments over a number of years, or it may be paid in periodic lump sums every few years.

As with everything, there are benefits and disadvantages to a structured settlement. One significant advantage of a structured settlement may be tax avoidance. With appropriate set-up, a structured settlement may significantly reduce the plaintiff's tax obligations as a result of the settlement, and may in some cases be tax-free.

However, this is offset by being ‘trapped’ by the periodic payments. If you wish to buy a new home, or other expensive item, you may be unable to do so because you generally cannot borrow against future payments under your settlement. Depending on your situation, you may do better by accepting a lump sum settlement and investing it yourself. Done properly, your long-term return may be higher than that provided by the annuities used in structured settlements.

A structured settlement can also protect a plaintiff from having settlement funds disappear on them. This is especially necessary when they are necessary to pay for future care or needs. In other words, sometimes a structured settlement can help protect a plaintiff from himself - some people simply aren't good with money, or can't say no to relatives. Even a large settlement can be rapidly spent.

Minors may also benefit from a structured settlement. This could provide for certain expenses during their youth, an additional amount to pay for college or other educational expenses, and even disbursements into adulthood. A severely injured person who has long-term special needs may benefit from having periodic sums with which to purchase expensive items such as medical equipment or modified vehicles.

However, as noted above, people who anticipate these issues should consult with a financial planner about their situation before choosing any particular settlement option or structure. For example, a financial planner might tell a severely disabled plaintiff to set up a special needs trust, rather than entering into a lump sum or structured settlement. This will be especially true for anyone who is receiving, or expects to receive, Medicaid or other public assistance.

The bottom line is that there are several issues to consider if you are concerned your personal injury settlement may have a negative impact on your other finances. While TheLawFirm.com may not be able to give you specific advice, we can help identify the issues and encourage you to seek advice from a qualified financial advisor or accountant.

Please contact us at 1(855) 464-0808 or for a free legal evaluation of your claims today!

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Personal Injury Confidentiality Clauses

It is not uncommon for the defense to ask the attorneys at TheLawFirm.com to agree to a confidentiality clause when we settle a case. Because we focus on serious personal injury and wrongful death, the stakes are high. We are seeing this commonly in our nursing home abuse cases.

But since personal injury compensation is generally tax free, what is the issue? The problem arises out of a United States tax court case. This case involved an incident in which Dennis Rodman, a basketball player, during the course of a game landed on a group of photographers and twisted his ankle.  Mr. Rodman then kicked one of the photographers, Eugene Amos.  Mr. Amos was immediately taken to a local hospital and the next day sought medical treatment from the Veterans Affairs Medical Center.  The medical reports from the local hospital and the VA did not disclose any serious injuries.  Nevertheless, Amos filed a complaint against Rodman seeking damages for personal injury.  The case settled for $200,000.

The Confidential Settlement Agreement and release stated that the amount of the settlement was $200,000 and included the standard language that Rodman would be released from any and all claims by reason of any damage, loss or injury sustained by Amos as a result of the incident.  The confidentiality clause of the release said that the terms of the agreement and release were to be kept confidential.  The Release also contained a liquidated damages clause to the effect that if there was a material breach of the Confidentiality Agreement, Rodman would be entitled to $200,000.

Believing the settlement to be tax free as a settlement for a personal injury, Amos excluded from his gross income the $200,000. However, the tax court held that the determination of the nature of the claim is factual.  The court stated that the character of the settlement payment hinges ultimately on the dominant reason of the payer in making the payment. 

Amos argued that the entire amount of the settlement was excludable from gross income as personal injury settlement.  The IRS argued that, except for a nominal amount for the minor injuries, the settlement was compensation for Amos’ agreement to the confidentiality provision.  The court held that Rodman’s ‘dominant reason’ in paying the settlement was Amos claimed physical injuries, but that there was a separate payment for Amos’ acceptance of the confidentiality clause.  The court determined that $120,000 of the settlement amount was for Amos’ claimed physical injuries and $80,000 was for confidentiality. The court noted that the Settlement Agreement lacked an express allocation between the physical and non-physical injury.

There are a number of ways that personal injury lawyers can address confidentiality agreements.

First, we can simply refuse them. This is our usual course of action. It is possible that this will preclude settlement but that has not been our experience.

Second, if the confidentiality clause is of integral importance, we can agree on a specific allocation of consideration between the physical injury and the confidentiality clause.  The danger to this is that the IRS can look beyond any nominal consideration and make a determination based on the substance of the transaction.

Third, we could agree on reciprocal promises of confidentiality without additional consideration.  The same danger of allocation by the IRS exists.

Fourth, we can ask for an indemnity provision compelling the defendant to indemnify the plaintiff for adverse or unforeseen tax consequences. 

Fifth, we could seek a private IRS ruling in advance of finalizing the settlement.  We have never done this as it is expensive and time consuming.

The bottom line for injured plaintiffs is that a confidentiality clause may turn what they think is tax free personal injury compensation into a taxable amount. Helping to minimize this risk, or avoiding it altogether, is where the experienced lawyers at TheLawFirm.com come in.

Please contact us at 1(855) 464-0808 or for a free legal evaluation of your claims today!

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