From agreement to payment
After a settlement, the paying side or its insurer usually requires a signed release before issuing payment, and the money is often sent to the lawyer's escrow account rather than directly to the client. In New York, settlements on behalf of a minor or a person who lacks capacity usually need court approval, and the funds may be placed in a restricted account. Payment after a court judgment can take longer if the other side appeals or does not pay voluntarily, in which case enforcement steps may be needed. Public entities often have their own payment processes. Asking about expected timing early helps avoid surprises.
What comes out before you are paid
Liens from Medicare, Medicaid, a workers' compensation carrier, or some health plans may need to be resolved out of the compensation payout, and the amount of a lien can sometimes be negotiated down. Attorney fees and case expenses are deducted according to the engagement agreement, and New York has rules limiting contingency fees in personal injury matters. The tax treatment of a payout depends on what it compensates; money for physical injuries is often treated differently from lost profits, interest, or punitive damages, which is a question to raise with a tax adviser. A written settlement statement should show each deduction clearly.
Lump sum or structured payments
Some settlements, especially larger injury settlements, are paid partly as a lump sum and partly over time through a structured settlement, often funded by an annuity. A structure can provide steady income and may carry tax advantages in some cases, but it is hard to change later. Selling future structured payments to a purchasing company generally requires court approval and often comes at a steep discount. If you receive public benefits that depend on income or assets, a payout can affect eligibility, and planning tools such as certain trusts may help. We go through these choices with you before the agreement is final.
