Compensation for personal injuries are generally once-off lump sum payments that aim to provide funds for past and future treatment and care for the long-term. As these types of payments are usually substantial, it is important that the recipients obtain financial advice as to how to best manage their compensation.
It is important that compensation payouts last to support an injured person for as long as the injured person continues to deal with the consequences of their injuries.
Why is it important to get financial advice for my compensation payout?
Obtaining good financial advice from a professional in relation to how you ought to manage your compensation funds can make a significant difference to your financial position moving forward. Financial advisors can help you maximise the long-term benefits of your compensation 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; and
- assessing the impact that your compensation payment may have on any Government entitlements you receive, and advising on ways to help protect or maximise such benefits, 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 losses’, none of the amounts are deemed eligible. This is why it is 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 cannot 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 advisor can provide advice on how to pass the funds from a personal injury settlement to future generations through a trust or a 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. Your financial advisor 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 08 8443 4888 or email [email protected].