Victims who suffer catastrophic brain injuries or other serious injuries which impair their lifetime income earning capacity will receive a very large lump sum settlement. There is a mechanism called a structured settlement to invest a portion of the lump sum which will be considered tax free by Revenue Canada as it is an award from an injury settlement. This provides a significant advantage, as the interest generated by the structured settlement (annuity) is interest free.
A second advantage is that a catastrophically brain injured victim or other very seriously injured victim is often in Alberta on AISH (Alberta Income for the Severely Handicapped) and if they have a large lump sum of money in their account they will lose their AISH payments as they will no longer qualify. Since AISH uses the definition of income that the Income Tax Act has adopted and the Income Tax Act says structured settlements from personal injury claims are not income, the structured settlement will not be considered income or an asset for the purpose of AISH. Therefore the severely brain injured victim may maintain his or her AISH payments.
Personal Injury Lawsuit Settlement
Perhaps the best reason for placing a large lump sum personal injury settlement award into a structured settlement is the fact that the structured settlement is irrevocable, and therefore the Plaintiff cannot collapse it in the future to get at the lump sum. This is important because a well known American study indicates that within two months following receipt of a significant monetary settlement (personal injury award, fatal accident award, lotteries, sweepstakes, insurance, inheritances, etc.), 25% of the recipients had nothing left. By the end of the first year, 50% had nothing left. By the end of the first two years, 70% had nothing left. And within five years of settlement, 90% of the recipients had nothing left.
Structured Settlement Awards
Therefore, given the above statistics, if you are receiving a large lump sum personal injury settlement award, and you need that money for your long term future income supplementation and payment of future medical costs it is, in our firm’s opinion, imperative that a good portion of your settlement be placed in a structured settlement to avoid the catastrophe that the above statistics represent. In other words, do not think that you will be the exception to the rule when the statistics indicate that 90% of recipients have nothing left of their significant monetary settlement after five years. Please also be aware that the law firm does not receive any fee or compensation from the life insurance annuity company for placing the annuity. In other words, the law firm is not in a conflict of interest in recommending a structured settlement for catastrophically brain injured clients.