Personal injury settlements are generally one-off compensation payments made for long term injuries and losses. As these types of payments are usually substantial, it’s important that recipients seek financial advice as to how to best manage their compensation payouts.
It is important that compensation payouts last to support an injured person for as long as they continue to deal with the consequences of their injuries.
Why is it important to get financial advice for my compensation payout?
As compensation settlements usually include a one-off payment, getting good financial advice on how to manage those funds can make a significant difference to your financial position moving forward. Financial advisors can help you do this by:
- Developing a personalised financial plan that makes the most of your compensation payment in accordance with your current and future needs.
- Determining your anticipated capital expenditure requirements.
- Arranging your affairs to protect your money whilst keeping your tax to a minimum. For instance, exemptions which allow you to contribute all or part of your personal injury payment into your superannuation fund, where you can commence a tax free, fully accessible income stream.
- Assessing the impact your compensation payment may have on any government entitlements you receive and advising on ways to help protect or maximise them, including those of your partner or carer.
It is important to understand that only the amount specifically apportioned as “personal injury” can be placed into your superannuation fund for “tax free” purposes. Also, unless settlement is broken down into “economic and non-economic loss”, none of the amounts are deemed eligible. This is why it’s important for an experienced personal injury lawyer to ensure that your settlement details are drafted correctly.
Can a financial advisor help in other ways with my compensation payout?
Preventing creditors from seizing your compensation payout – Generally, the money you receive from your personal injury settlement can’t be seized by creditors. A financial advisor can assist to protect your settlement money from creditors even further by placing your money into a trust which can make it more difficult for debtors to access your money for a past due debt.
How to pass money onto future generations – A financial adviser can provide advice on how to pass the funds from a personal injury settlement to future generations through a trust or provisions for how the money is to be transferred in your will.
If you place your compensation funds in a bank or an investment portfolio, you may have the option to name your children or others as beneficiaries to those accounts. On your death, your beneficiaries will only need to present your death certificate to have the account transferred into their name.
Facilitate the appointment of a financial manager – who can help you take care of the day-to-day management of your affairs if your injuries prevent you from doing so. For example, a financial manager through the NSW Trustee and Guardian or privately. Your financial adviser will work closely with your financial manager.
Meet with you at least annually to review your financial situation – to ensure you are on the right track to achieve your financial goals.
For further information on how a financial planner can assist you, we recommend you make an appointment with one of our experienced lawyers.
Conclusion
A financial advisor can help to ensure your compensation payout lasts to support you for as long as you continue to deal with the consequences of your injuries and beyond. Finalising your financial management options to make the most of your compensation payment is vital in helping you stay on track with your finances, so you can meet your ongoing needs.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9708 2222 or email [email protected].