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5 Steps to Creating Settlements That Last | NextPhase Community

Updated: Oct 2, 2023



5 Steps to Creating Settlements That Last

If you are an Injured Plaintiff nearing the finalization of your case settlement, securing your financial future is paramount. You want your settlement to be a source of stability and prosperity that lasts a lifetime. Achieving this requires a strategic approach. In this comprehensive guide, we'll explore the five crucial steps you must take to build settlements that endure and provide you with peace of mind.

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The journey to creating your future starts now

1. Prepare in Advance for Settlements That Last

Before you even engage in settlement negotiations, preparation is key. Consulting with financial experts, assessing your current financial situation, estimating future medical and living expenses, understanding tax implications, and identifying potential sources of income are vital steps.

Consulting with Financial Experts

Consulting with financial experts should be your first move when approaching a potential settlement. These experts can help you understand the intricacies of your financial situation and provide guidance on how to make the most of your settlement. They can also assist in determining the tax implications of different settlement options and help you identify potential sources of income. Planning for settlement is different than planning for retirement or for college expenses. I always recommend working with a Settlement Planner who plans settlements for injured plaintiffs on a regular basis. A good place to do a search for a Settlement Planner in your area is the Society of Settlement Planners.


Another valuable resource for finding Settlement Planning experts is the NextPhase Community where you can connect with professionals who specialize in assisting plaintiffs like you. They have the expertise to help ensure that your settlement is structured to meet your long-term financial goals.


Assessing Your Current Financial Situation

Assessing your current financial situation is a critical step in preparing for a settlement. This involves taking stock of your assets, liabilities, and overall financial health. You need a clear understanding of where you stand financially before you can make informed decisions about your settlement. Again, as a potential personal injury settlement recipient, you may require specialized programs and government benefits so make sure you and your financial professional consider all aspects of your financial situation.


Estimating Future Medical and Living Expenses

Injured Plaintiffs often have ongoing medical needs. Estimating these future expenses is crucial to ensure that your settlement covers your healthcare costs adequately. Work with a healthcare consultant or financial planner to project your medical and living expenses accurately. As part of the legal preparation for settlement, your attorney may authorize a detailed Lifecare Plan created by professionals who know how to access and estimate medical care, equipment, services and their associated costs. A report like this can be very helpful in the creation of a settlement plan and should be shared with your advisor(s).


Understanding Tax Implications

Tax implications can significantly impact the long-term value of your settlement. Certain types of income may be taxed differently, and there could be tax advantages to structuring your settlement in specific ways. A tax expert can help you navigate these complexities and minimize your tax liability.


Identifying Potential Sources of Income

Your settlement may not be your sole source of income after settlement. Identifying potential sources of income beyond your settlement can provide you with added financial security. This might include investments, annuities, or even part-time employment, depending on your circumstances.


2. Create a List of Needs vs. Wants

Distinguishing between your needs and wants is essential to allocate your settlement effectively. Prioritize essential expenses, identify discretionary spending, allocate funds accordingly, adjust your lifestyle if necessary, and seek professional guidance when making these critical decisions.


Prioritizing Essential Expenses

Your essential expenses include things like housing, utilities, groceries, and medical care. These are the non-negotiable costs of living that must be covered by your settlement. Create a budget that ensures these expenses are met first.


Identifying Discretionary Spending

Discretionary spending covers non-essential items or activities like dining out, entertainment, and luxury purchases. While it's essential to enjoy some of life's pleasures, identifying and controlling discretionary spending can help you manage your settlement more effectively.


Allocating Funds Accordingly

Once you've identified your essential and discretionary expenses, allocate your settlement funds accordingly. Set aside enough to cover your essentials comfortably and consider setting up a separate account for discretionary spending.


Adjusting Your Lifestyle If Necessary

Your settlement may not be limitless, so you might need to adjust your lifestyle to fit within your financial means. This could mean making sacrifices in certain areas to ensure your settlement lasts. The goal is to create the greatest settlement value that is only limited by your financial and physical capabilities after settlement.


Seeking Professional Guidance

Making decisions about your settlement can be overwhelming. Seeking professional guidance from a settlement planner or financial advisor who is skilled in Settlement Planning can provide you with the expert advice needed to make informed choices about your finances.

To help you navigate these important decisions, you can explore resources and support through a Settlement Planning group like ELANA Financial. They offer valuable insights into managing your finances effectively and making wise choices with your settlement.


3. Create the Plan Prior to Settlement

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Create an Action Plan before settlement

To build settlements that stand the test of time, you need a solid financial plan. Establish clear financial goals, create a budget, consider investment opportunities, set up an emergency funds, and identify long-term financial strategies.


Setting Clear Financial Goals

Your financial goals should be specific, measurable, achievable, relevant, and time-bound (SMART). These goals will guide your financial decisions and help you track your progress over time.


Creating a Budget

A budget is your roadmap for managing your settlement. It outlines your income, expenses, and savings goals. Stick to your budget to help ensure that your settlement lasts. I find it best to be conservative in estimates. Under estimate income and overestimate expenses. This helps account for less than expected income and more than expected expenses....it happens!


Considering Investment Opportunities

Investing a portion of your settlement wisely can help it grow over time. Consult with an investment advisor to explore suitable investment options that align with your financial goals and risk tolerance. This probably sounds a bit easier than it truly is if you don’t do it properly. In my opinion, Injured Plaintiffs are usually risk adverse…in other words, risk is bad, especially unnecessary risk! Take the approach of being careful and looking for guarantees in the most important areas such as income and protection. Even in the more flexible type of products such as investment accounts, it’s usually advisable to create portfolios that limit downside risk during negative financial market performance.


Setting Up an Emergency / Opportunity Fund

An emergency fund is a financial safety net that covers unexpected expenses like medical emergencies or car repairs. Building an emergency fund is essential to prevent you from dipping into your settlement for unplanned costs.

An opportunity fund is created to take advantage of moments where a safe amount of capital can be used to enhance a plan or life experience (such as a trip to Lourdes healing waters in France). Experiences and opportunities that are done right, and enhance the overall settlement value can be a very good thing emotionally, physically and financially.


Identifying Long-Term Financial Strategies

Long-term financial strategies might include retirement planning, estate planning, and wealth preservation. These strategies are crucial for ensuring that your settlement continues to benefit you and your family for generations to come.



4. Make Sure to Include Guarantees and Flexibility

Your settlement plan should provide both guarantees and flexibility. Consider structured settlements with guaranteed payments, insurance policies for added security, flexible investment options, and periodic reassessment and adjustments.


Structured Settlements with Guaranteed Payments

Structured settlements are an excellent option for providing guaranteed income and lump sums over time. These specially designed settlement annuity payments are typically tax-free in personal / physical injury settlements and can help ensure a steady stream of income for a short time, or a lifetime, and anything in-between. Settlement annuities are part of the legal settlement terms and must be documented in the release language when settling a case. Too often, injured plaintiffs are not made aware of the benefits of settlement annuities by their attorneys and miss the opportunity to create a lifetime of tax-free, guaranteed income. Again, getting out in front of this issue is critical to do prior to officially reaching final settlement.

To learn more about structured settlements, explore the National Structured Settlements Trade Association site that offers valuable information on structured settlements and their benefits.


Insurance Policies for Added Security

Insurance policies, such as disability insurance or long-term care insurance, can provide additional financial security. These policies can protect you and your settlement in the event of unforeseen circumstances.

The use of life insurance is very important for safety and protection. In many cases, we use settlement funds to purchase a life insurance policy on the life of a caretaker for the injured plaintiff. This strategy helps if a caretaker passes away before the injured plaintiff. The additional expense of caretaking could put excessive strain on a settlement plan going forward if not for the life insurance proceeds. Death benefit proceeds can be used to pay for extra services and lifestyle changes to help a settlement last longer. In certain policies, cash values (investment earnings) inside the policy can be used during the caretaker's lifetime to provide additional income and flexibility for the injured party.


Flexible Investment Options

While guaranteed income is essential, having some flexibility in your investments can allow your settlement to grow and adapt to changing financial needs. Consult with a financial advisor to explore diversified investment options.


Periodic Reassessment and Adjustments

Your financial situation will change over time. Periodically reassess your settlement plan and adjust as needed. We recommend reviewing the plan annually with your advisor / support team. This helps ensure that your plan remains aligned with your goals and circumstances and can adapt to changes along the way.


5. Stick to the Plan

Once your settlement plan is in place, discipline is crucial. Regularly review your financial situation, avoid impulsive financial decisions, revise your plan as life circumstances change, and seek professional guidance when needed. Staying committed to your financial strategy is the key to lasting success.

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Make the plan and stick to it


In conclusion, building settlements that last a lifetime requires meticulous planning, foresight, and dedication. Your settlement should be more than a one-time windfall; it should be the foundation for lifelong financial stability and prosperity. Follow these five essential steps, and you can secure your financial future, providing peace of mind for you and your loved ones for years to come. For additional resources and support, explore the following websites: NextPhaseCommunity.com, ELANAFSA.com, SocietyofSettlementPlanners.com, and NSSTA.com.


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