The experienced Bloomington personal injury team at Betz & Port, P.A. has decades of combined experience in helping clients achieve favorable resolutions to their claims. In addition to court-ordered damages, the outcomes we have secured for clients include valuable settlements to ensure they are appropriately compensated for their injuries. With larger settlements, attorneys often recommend clients seek the services of a financial advisor to strategize investing decisions to help maximize the benefits of the payments they receive. Our clients trust us to make these recommendations in part because we have established a track record of defending their interests. To learn how we may be able to assist you, call (763) 323-6911 to connect with one of our Minnesota personal injury lawyers.
What Is a PI Settlement?
PI is an acronym for personal injury. This is the type of law that covers most accident claims, and a few other types of tort cases in which one person is harmed by another party’s negligence. Although many people seek the services of a personal injury lawyer initially because they anticipate a court case, often personal injury claims are eventually “settled” out of court, even if some steps of trial preparation have already taken place. When a defendant is ordered by a court to pay a plaintiff damages, that payment is usually called an award. When in the same situation, the two parties reach an agreement, and the responsible party voluntarily pays the claimant compensation for their damages, that is called a settlement. Many individuals seek the assistance of a financial advisor to help them strategize how to make the most of these PI settlements.
Financial Advisors and Personal Injury Settlements
Personal injury settlements in Minnesota often require structured financial planning, and working with regulated financial professionals may help individuals manage compensation effectively. A personal injury settlement is compensation agreed upon outside court, distinct from a damages award ordered through litigation. Settlement funds may be reduced by attorney fees, court costs, and tax obligations governed by the Internal Revenue Service and applicable state tax laws.
Do You Need a Financial Advisor for an Insurance Settlement?
An important part of determining whether you need a financial advisor after a PI settlement is to define clearly what you mean by financial advisor. Outside the finance industry, many individuals think of a “financial advisor” as anyone who provides advice on how to manage finances. This category is unhelpfully broad, as it covers professionals in careers from stock broker to investment advisor representative to accountant to personal money coach. These are widely varied fields with widely varied expertise. Importantly, they are also subject to very different regulations.
Risks of Working With Informal Money Managers
However, it is worth noting what has become a widespread cottage industry of individuals deciding they are ready to advise on money management and advertising their services as a “coach” or “consultant.” Seeking these services, particularly online, has become very popular in some circles because they are accessible, and many of the people advertising their services are personable and appear to offer grounded words of wisdom. Some of these people can be very talented, and many of them mean well and sincerely try to provide a valuable service. There is a problem, however, in that the arrangement necessarily lacks oversight. A “personal money coach” may be almost anyone who decides to call themselves by that name and begin offering services.
This does not inherently mean that the individual offering those services lacks financial acumen or gives bad advice, but it does mean that there are very few regulatory “guardrails” to protect clients against bad advice, whether it is given deliberately or through misjudgment. If a client is expecting to receive a substantial settlement, and particularly if they are considering options for investing the money to maximize its long-term yields, a skilled lawyer would typically try to steer them toward professionals in regulated industries. The more robust safety nets the regulatory frameworks put in place can help protect these funds. Remember that you can always take your day-to-day budgeting needs to a consultant or coach, after you have set up your larger-scale investment strategy in place with the help of a financial advisor working in a more formal capacity.
Types of Financial Advisors in Regulated Industries
Not unlike the way attorneys are expected to abide by the Rules of Professional Conduct in their respective states, and clients may file ethics complaints with state bar associations when they believe an attorney has breached those rules, certain financial advisor roles are also subject to strictly regimented oversight by an industry authority or a federal agency. Broker-dealers, who not only recommend investment trades but perform them on behalf of clients and typically receive a commission, are usually subject to industry-specific rules overseen by FINRA (Financial Industry Regulatory Authority).
Crucially, FINRA is a non-governmental organization whereby financial institutions voluntarily cooperate to establish standards for professional conduct and transparency. A separate set of financial advisors is actually called registered investment advisers, or RIAs; these financial advisors (or advisers) fall under the authority of the United States Securities and Exchange Commission (SEC). This terminology can become somewhat confusing, as an RIA is actually a type of financial advising business entity, while the individual who offers financial advice for and through the RIA is an IAR, an investment advisor representative. As FINRA itself explains, financial advisers (with an e) are generally registered with either their state securities regulator or the SEC.
Accountants and CPAs as Financial Advisors
Many people work with an accountant each year to file their state and federal income tax returns. However, even if you have had your taxes prepared by the same accountant for many years, you may not be used to thinking of this person as a financial advisor, because in many cases they will simply process the information you submit to them in the form of W-2s or 1099s or other tax forms, and get your signature on the results of their computations so that they can file the tax returns on your behalf. Some accountants, on the other hand, offer more extensive tax planning services that constitute an important form of financial advising. Because the tax implications of a PI settlement can sometimes be considerable, many individuals do find it helpful to speak with an accountant experienced in handling complex tax matters, even if the person receiving the settlement does not expect to need the kind of investment-oriented services some financial advisors provide.
In most cases, the type of accounting professional you will want to speak with about your personal injury settlement will be a CPA. You may have heard “CPA” used on its own, since the term is rarely spelled out in everyday usage; the acronym stands for certified public accountant, and the certification generally means that these accountants have met industry standards for certification. Usually, these have to be renewed periodically through continuing education, so that the CPA remains current. The Minnesota Society of Certified Public Accountants (MNCPA) provides a directory to assist with locating a CPA in good standing near you.
Is My Settlement Value Enough for a Financial Advisor?
When our clients ask us whether the settlement in a personal injury case is enough for a financial advisor, often what they have in mind is a question about whether they are likely to need a financial professional’s advising services to help manage the amount of money they receive in their settlement payouts. This is an important question, but its framing overlooks another important consideration that, for many accident victims, does not come to mind until relatively late in settlement negotiations: whether the financial advisor requires a minimum “threshold” level of asset value before they will accept a client’s portfolio for management. The factors that determine the answer will depend partly on which way you mean the question.
How Much of My Settlement Will I Keep?
Individuals who expect to receive substantial settlements for their injury claims naturally have questions about how much of the sum named in the settlement documents will actually be theirs to keep. Three main factors can affect how much of a PI settlement remains yours after the payment has been made:
- How any court costs or mediation fees are handled
- Attorneys’ fees (if you work with an attorney)
- Taxes
Taxes will generally be determined by a combination of the tax laws in your state of residence and the rules followed by the Internal Revenue Service (IRS).
Unless there is a court rule or order specifying how fees must be divided between the parties, whether you are responsible for some or all of these will likely depend on the terms of the settlement agreement itself; these can sometimes be considerable, so those costs are a point to keep in mind as you negotiate for a fair settlement. An attorney’s fees in a personal injury case will usually come out of the settlement or judgment, but the proportion of the whole that goes to the attorney will depend on the specifics of the fee schedule agreed between attorney and client at the beginning of the case. Attorneys with Betz & Port, P.A. typically discuss fee schedules with prospective clients during the initial consultation, in which we evaluate their claim. The meeting also gives individuals considering legal action a chance to ask any questions that may be on their minds.
Understanding the Stakes: Managing a PI Settlement
Our attorneys do their utmost to achieve favorable outcomes for our clients, whether that means an award of damages in court or a fair settlement through negotiations. Whether a client receives compensation via award or settlement, however, the individual must be in a position to manage those funds effectively. Personal needs and circumstances, as well as the total amount of money involved and the way it is disbursed, can affect the optimal financial management strategy in a particular case. Attorneys at Betz & Port, P.A. often recommend that clients speak with a financial advisor who can help them assess practical tax planning strategies, even before accepting a settlement in some cases. After receiving a PI settlement, it may also be beneficial to speak with a financial advisor who is prepared to assist clients in investing their settlement money wisely.
Frequently Asked Questions About Personal Injury Settlements And Financial Advisors
The following FAQs address common legal and financial questions related to personal injury settlements, financial advisors, and post-settlement planning considerations.
What Is A Personal Injury Settlement?
A personal injury settlement is a legally binding agreement in personal injury law where compensation is paid by a responsible party to resolve a claim without a court judgment. Personal injury settlements typically arise from negligence-based claims and allow parties to avoid trial while agreeing on compensation for damages such as medical expenses, lost income, and pain and suffering.
Do Individuals Need A Financial Advisor After A Personal Injury Settlement?
Individuals may benefit from a financial advisor after a personal injury settlement when managing large compensation amounts, tax obligations, or long-term investment strategies become complex. Financial advisors, including those regulated by the SEC or FINRA, can assist with structured financial planning, investment allocation, and risk management following a settlement.
What Types Of Financial Advisors Are Regulated In The United States?
Financial advisors regulated in the United States include broker-dealers overseen by FINRA and registered investment advisers regulated by the SEC or state securities authorities. These regulated professionals must comply with established standards, disclosure requirements, and fiduciary or suitability obligations, which provide oversight and accountability for financial advice.
What Are The Risks Of Working With Unregulated Financial Consultants?
Unregulated financial consultants, such as informal money coaches, may lack oversight, standardized qualifications, and enforceable accountability, which can increase the risk of receiving unreliable or unsuitable financial advice. Unlike SEC-registered or FINRA-regulated professionals, these individuals are not bound by consistent regulatory frameworks or disciplinary systems.
How Are Personal Injury Settlement Funds Reduced By Fees And Taxes?
Personal injury settlement funds may be reduced by attorney fees, court costs, mediation expenses, and tax obligations governed by the IRS and applicable Minnesota tax laws. The exact distribution depends on the settlement agreement, contingency fee arrangements, and whether portions of the settlement are considered taxable income.
How Can A Certified Public Accountant Help With A Personal Injury Settlement?
A Certified Public Accountant (CPA) can assist with personal injury settlements by analyzing tax liabilities, preparing filings, and offering tax planning strategies related to settlement proceeds. CPAs follow professional standards and continuing education requirements, which can support accurate compliance with IRS and Minnesota tax regulations.
How Can Betz & Port, P.A. Assist With Personal Injury Settlement Matters?
Attorneys at Betz & Port, P.A. work to help individuals understand personal injury settlements, fee structures, and financial considerations following compensation awards. Consider visiting with an experienced attorney at Betz & Port, P.A. to learn more about available legal options and how settlement outcomes may affect financial planning decisions.