When you are injured in an accident due to someone else’s negligence, you are entitled to compensation for your injuries, lost wages and more. However, when you are awarded a settlement, you may find it greatly increases your assets. This means your estate will become larger and it will have an impact on you and those who stand to inherit from you. You can expect the following effects when you are working on your estate planning.
For most people, the cap on federal taxes means you won’t have to pay these taxes on this type of settlement. The current cap is $5.45 million. Anything beyond this amount will be taxed. However, state taxes aren’t as fixed and can vary greatly depending on where you live. Some states don’t even charge tax on personal property. Gifts, on the other hand, may be subjected to tax.
One of the primary factors in deciding the amount of a personal injury settlement is current and future medical expenses. Many of these injuries result in long-term issues that will require medication and other medical treatments for a period of time, potentially for an entire lifetime. When reporting the value of these settlements for estate planning purposes, it’s important to take these medical costs into account. Not properly taking account for these medical expenses will mean your estate could be overvalued, resulting in higher than necessary taxes on money that won’t be there.
Your life can change dramatically as the result of a personal injury. Some individuals are severely injured to a point they suffer from a disability that will last the rest of their lives. This creates a change in the individual’s status, which will require the appropriate documentation to prove it. This can include your will, other estate documents, power of attorney papers and more. For children who are underaged and their parents are no longer living, a trust may need to be established to manage their money and help give them a good quality of life.
An Investment Plan
If you are disabled and can no longer work as you once did, you need to make sure you are protected for your financial future. Even if you receive a personal injury settlement that seems large enough to take you through life, a sound investment plan is essential. Talk to your attorney and other investment professionals about this process. The earlier you get your investments in place, the greater your returns will be. This will help pad an individual’s account in case medical expenses or other costs become more than predicted.
When you are injured in an accident, it’s important to learn how to protect your financial future, as well as the future of your loved ones you will one day leave behind. While this isn’t the most pleasant topic, talking to an experienced attorney can provide the guidance you need for a successful outcome.