How Are Personal Injury Settlements Paid Out?

Most personal injury settlements are paid once, as a single check or wire, into your lawyer’s trust account. The fee, case costs and any liens are paid from that deposit, and the rest goes to you. Some people take part of the money as a structured settlement, paid over time through an annuity, and money for a child is usually held under a court order.

Is a settlement paid in a lump sum or in monthly payments?

You and the defense can agree to either one, or to a mix.

• Lump sum. One payment for the full amount. It is the usual choice for most claims because it closes the case and lets you pay medical bills at once.
• Structured settlement. Part of the money buys a stream of future payments, often monthly or yearly, sometimes with larger payments on set dates. The defense or its insurer usually assigns the duty to pay to an annuity company.

Federal tax law treats both forms the same for a physical injury claim. 26 U.S.C. 104(a)(2) excludes those damages “whether as lump sums or as periodic payments.” For the assignment to qualify under 26 U.S.C. 130, the payments must be fixed as to amount and timing, and the person receiving them cannot speed them up, delay them, increase them or decrease them. That rule is why a structure is hard to change once signed.

A structure can make sense for long-term care costs or for someone who wants a steady income. A lump sum gives you control and flexibility. The choice is yours to make with your lawyer, and it has to be made before the release is signed.

What gets paid before you receive your share?

Money comes out in a set order, and you should see each line in writing.

1. Attorney fee and case costs, as your signed agreement says. In Washington, when part of a recovery is paid in the future, RPC 1.5(c)(4) says the percentage fee is applied either to the amounts as you receive them or to what the settlement actually cost the defendant.
2. Liens and repayment claims. Medicare must be repaid within 60 days of the settlement payment under 42 CFR 411.24. Medi-Cal says a settlement is not final until it has had a reasonable time to set its lien (DHCS). A Texas hospital lien is capped at the lesser of certain charges or 50 percent of the recovery (Property Code chapter 55), and Washington caps combined provider liens from one accident at 25 percent of the settlement (RCW 60.44.010).
3. Your net share.

With a structured settlement, the liens and fee are usually paid from the cash part at closing, and the annuity pays you later.

How long after settling do you get the money?

Three things set the pace: the insurer’s payment, the bank, and the liens. Once the check reaches the firm, California Rule 1.15 requires notice to you within 14 days, absent good cause. The same rule creates a presumption of a violation if the lawyer, without good cause, does not pay out undisputed funds within 45 days after they become undisputed. Washington RPC 1.15A bars paying out of trust until the deposit has cleared and been collected, and it requires undisputed portions to be paid promptly.

Medicare is often the longest step. CMS explains that after a settlement its contractor sets a termination date, adds related claims, and then sends a formal demand letter. Interest runs from the date of that letter. For the trust account side, see your settlement check.

How is a settlement paid when the injured person is a child?

A parent cannot simply cash a child’s settlement. Each state requires a court to review it.

• California. A petition to approve a minor’s compromise is filed under California Rules of Court, rule 7.950. The court’s order on form MC-351 can direct the balance into one or more blocked accounts, which cannot be touched without a further court order.
• Texas. Under Texas Rule of Civil Procedure 44, a next friend may settle a child’s lawsuit only with the court’s approval. When a child is represented by a next friend or guardian ad litem, the court may order how the funds are invested or authorize a bonded manager under Property Code chapter 142.
• Washington. SPR 98.16W requires court approval of every settlement for an unemancipated minor and the appointment of a settlement guardian ad litem in most cases. Except for any structured portion, the money is paid into the court registry or as ordered, then placed in a blocked account or trust. If more than $50,000 remains after approved expenses, a guardian, limited guardian or qualifying trust is required.

Can you sell structured settlement payments later?

Only with a judge’s approval. Texas chapter 141 and Washington RCW 19.205 both say a transfer is not effective unless a court finds the sale serves your interest, considering the welfare of your dependents, and that you were advised in writing to get independent professional advice. Texas also requires a disclosure statement at least three days before you sign. Federal law adds a 40 percent excise tax on the buyer’s discount unless the transfer is approved in advance by a qualified court order (26 U.S.C. 5891).

What to do now

1. Before you sign the release, decide whether any part should be structured, and ask to see the annuity terms in writing.
2. Ask for a list of every lien with the current amount and who is negotiating it.
3. If you have Medicare or Medi-Cal, confirm the program has been told about the claim.
4. Ask for the date the money arrived, the date it cleared and a written closing statement.
5. If the injured person is a child, ask which court will approve the settlement and where the money will be held.
6. Read whether your settlement is taxable before you invest or spend it.

Questions about when you will be paid?

If your case settled and you are not sure how or when the money will reach you, call Beverly Law at (310) 552-6959. We handle injury claims in California, Texas and Washington. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. You owe no fees or costs unless we win.

Common questions

Related pages

Car Accident Settlements · Car accident settlements · Your settlement check · Are personal injury settlements taxable? · Settlement for a child · Law Blog

Important: This page is general information, not legal advice, and reading it does not create an attorney-client relationship with Beverly Law. Laws change and every case is different; talk to a lawyer about your own situation. Attorney advertising. Prior results do not guarantee a similar outcome. You owe no fees or costs unless we win. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: 2026-11-12.