After reaching a settlement, you might wonder how the funds will get to you. Once a settlement is finalized, the funds are disbursed through a series of steps to ensure that all financial obligations are met, and all parties are compensated appropriately. Understanding this disbursement process is important, as it outlines the phases involved in transferring funds from the settlement agreement into your hands.
Understanding the Settlement Funds Distribution Process
First, the defendant or their insurance company issues a settlement check, typically made out to both the plaintiff and their attorney to ensure proper allocation of funds. Then, the settlement check is deposited into the attorney’s trust account, commonly known as an IOLTA (Interest on Lawyers Trust Account). This account is specifically set up to manage client funds ethically and responsibly, following all legal and professional standards.
After the funds are in the trust account, the distribution process begins. The funds are managed and allocated based on the agreements made with your attorney. This includes several key steps:
Deduction of Attorney Fees
Your attorney will deduct the attorney fees, which are typically outlined in your retainer agreement. This may include a contingency fee, hourly fee, or flat fee, depending on the arrangement you have in place.
Repayment of Case-Related Expenses
Case-related expenses are costs incurred during the litigation process that are distinct from attorney fees. These can include court filing fees, costs for expert witnesses, fees for obtaining medical records, and other necessary expenses that support your case. These will also be deducted from the settlement funds.
Payment of Medical Liens and Other Claims
Any outstanding medical bills or liens, such as those from healthcare providers or insurance companies, are paid from the settlement funds. In some cases, your attorney may be able to negotiate for reduced costs.
Repayment of Pre-Settlement Funding
Pre-settlement lawsuit funding is designed to assist plaintiffs in managing urgent financial needs while their case is ongoing. If you receive an advance on your settlement through pre-settlement funding, this amount will be repaid to the funding company from the settlement proceeds before you receive your portion.
Final Funds Are Distributed to Client
After all deductions are made, the remaining funds are distributed to you according to the agreed method—whether as a lump sum or through structured payments. A lump sum payment provides you with the entire amount at once, giving you immediate access to all the funds. In contrast, a structured settlement distributes the funds in periodic payments over a specified period, ensuring a steady income stream.
Your attorney will provide a detailed statement outlining each deduction and the final amount you will receive, which you will be required to sign. This transparency helps you understand exactly where your settlement funds have gone and what remains for you.
Contact Mustang Funding for Everything Pre-Settlement Funding
By familiarizing yourself with how your settlement funds are distributed, you can better anticipate what to expect and make informed financial decisions, ensuring a smooth transition from settlement to receipt.
If you have any questions about the process of pre-settlement funding and how it might fit into your overall financial strategy, Mustang Funding is here to help. Reach out to us today to learn more.
