The Settlement Alliance

Stop! Make Sure You Answer These 5 Questions Before Settling Your Case

Stop! Make Sure You Answer These 5 Questions Before Settling Your Case

Oct 24, 2016

It’s tempting to wrap up your client’s settlement as quickly as possible. If you move too quickly, though, there are several issues that can derail the settlement before the money is in your client’s hands. Here are five questions to answer before signing the settlement agreement:

Question 1: Does Your Client Currently Receive Needs-Based Government Benefits?

For individuals receiving needs-based government benefits, accepting a lump sum settlement could cause them to lose eligibility. These types of benefits include Medicaid, SSI, food stamps, subsidized housing, and CHIP. Eligibility is determined using an asset test, and in some states, asset limits are as low as $2000 (if single) or $3000 (if married). If your client loses benefit eligibility, yet the settlement doesn’t provide enough funds to cover their financial and medical needs, the implications could be financially catastrophic.

Question 2: Does Your Client Have any Pending Liens?

Liens—whether imposed by Medicare, Medicaid, ERISA/private insurance, or the VA—need to be properly resolved before the settlement can be finalized. If an existing lien isn’t paid, it may affect your client's ability to receive their settlement proceeds. An in-depth review of the lien charges should also be conducted to determine whether there are any line items unrelated to your client’s injury. If unrelated charges get paid out of the settlement, it can create a liability issue for you and your law firm.

Question 3: Is Your Client Involved in an Active Bankruptcy?

Disbursement of the settlement could be affected if your client was injured before filing bankruptcy or during an open bankruptcy. In certain states, settlement proceeds are considered an asset of the bankruptcy estate. If your client lives in a state with no exemptions, or if an exemption isn’t claimed, the bankruptcy trustee has the right to declare an interest in the settlement proceeds. The trustee can then decide whether to claim the funds and distribute them to unpaid creditors or to release any interest in the settlement so that your client can receive their money.

Question 4: Will Your Client Have to Go Through Probate/Estate Administration?

If your client is receiving a settlement on behalf of a loved one’s estate, they may have to go through the estate administration process. This process involves reviewing the decedent’s assets and dividing them according to the law or the decedent’s wishes. Probate can be a lengthy process, and the settlement funds will not be disbursed until after it has been completed.

Question 5: Has your client been educated about all possible options settlement options?

Above all, your clients must be informed about all possible options for settlement. Settlement Planning isn’t one size fits all—your clients each have individual financial and medical needs. The last thing you want is a client who returns a few years down the line, wondering why they weren’t made aware of a certain settlement option. As we’ve seen in the past, it can also open your law firm up to significant liability issues (see Grillo v. Pettiete et al, 96-45090-92, 96th District. Court, Tarrant County, Texas). It’s best to make sure that each of your clients is informed and involved in planning how to manage the settlement proceeds.

Work with a Settlement Expert

The Settlement Alliance focuses on a comprehensive approach to settlement planning. We will walk your client through their settlement options and will help you resolve the settlement as efficiently as possible. To learn more, contact us today at 800-464-2500 or

Disclaimer: This post is intended for informational purposes only. The Settlement Alliance does not provide legal or tax advice.

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  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential