Where does all that settlement money go?

In this week’s video blog I’ll be explaining how the settlement pie gets divided up and distributed.

Hi guys, Matt Clendenin here with the Clendenin Firm. I want to talk about settlements today. In particular I want to talk about where all the settlement money goes. The first thing that we go over with a client where we get a settlement offer or even when we make a settlement offer is how much of that settlement is going to be going to the client. Because of course everyone's asking how much money am I going to get? The client usually doesn't really care at first about how much money the lawyer gets or how much money the medical bills cost. The client wants to know what goes in their pocket. So it's important to talk about this. So the client really understands what's happening with the settlement. Another way to look at it is what I call The Pie. When the client sees the bottom line number, what they really care about is money that goes to them and money that's being taken by other people.

So when the client sees the pie, the natural emotional instinct is to view the pie like this. What goes to me, what doesn't, but it's important to remember that those medical bills that usually take up about 30% of the settlement. Those medical bills were the client's medical bills, the doctors were helping the client, that money is for the client's benefit. So that 30% of the pie, which are medical bills, actually should be added in to the client's benefit. Also, going backwards, clients usually can expect to get about 30 or 40% of the settlement. 

Now there's the lawsuit costs. We already talked about that a little bit, but those costs are your costs. When you take your car into the mechanic and you have to pay for costs for a part, those parts are going into your car. The mechanic doesn't get your car at the end of the day.It's the same thing with your legal case. The lawyer is doing you a huge favor by fronting those costs, but at the end of the day, it's your case that you won and it's the lawyer simply advancing the costs. So all those lawsuit costs were for your benefit. Those lawsuit costs made it possible to win. It's those lawsuit costs that are helping you. So those are actually your costs. So that part of the pie is for your benefit too. So when you really look at the pie, Oh and costs take about 5 to 10% of a settlement, usually around 5% so when you look at the pie, that goes to the client's benefit to really the only thing that doesn't directly go to the client's benefit is the lawyer's fee for the lawyers time. But like we talked about, that actually is indirectly for your benefit and the lawyer is the one bearing the risk.But that's the only part of the pie that isn't directly for the client's benefit. 

Lastly, don't forget Uncle Sam. For the client, their personal injury settlement is tax-free. Unfortunately for the lawyer, this is our income. So we get taxed on income tax just like our paycheck. So when you look at the lawyers part of the pie, actually about 30 to 40% of that is going to Uncle Sam. So when you really look at the pie, at the end of the day, you're adding in the 30% the client gets, the 5% that are going to lawsuit costs, the 30% that's going to medical bills. Those are all for the client's benefit. So the pie really looks like this, money to the client's benefit, money to uncle Sam, and then money to your lawyer. So I hope that gives people a little bit more understanding of a settlement. Where does the settlement go and how much of the settlement should I be getting? Most importantly, why the heck are lawyers so expensive? Hope everyone's doing well. I have a great day.