There is a great deal of money being moved around in a personal injury lawsuit. As our lawyers may already know, the process from claim to payment relies on not only the ruling being in favor of the plaintiff, but the law firm being able to properly manage the work and finances that go into the case.
For most personal injury cases, once an individual makes the step to meet with a lawyer, assuming the case has enough backing, the law firm will then file a lawsuit to sue another individual or an insurance company. Once this happens, the case will either go to court or settle in private meetings. The money won from the case is then paid to the law firm's trust, not the individual who filed the case. Once received by the law firm’s trust account, the funds are then dispersed to the client and the law firm’s operating account. This fee can range from 20-35%, depending on the size of the payment and the firm.
By understanding this process, you as the individual can have more control over your case by being an active part of the process. While it is the lawyer's job to be the active representative of the client, other reasons for being active in a lawsuit can still help. The financial aspect of a lawsuit can often be forgotten about. You may be asking yourself, "what can I do while waiting for a case to settle" and there are several answers to that question. For example, some people need to take out pre-settlement loans to cover some of the lawyer fees because while many firms front the cost of the case, there are still hourly fees and other expenses that often come into the picture. Others also need to consider their health insurance because while you are waiting for money to come into your account, hospital bills will still come in. Here at Interactive Accountants, we recommend taking an active role in your finances and making all parties that could potentially be involved in the lawsuit aware of the issue so that further payment plans and cooperation with your health insurance are easier and faster. For more information on what we have uncovered in our years of experience regarding law and its practices click here.
While you make your way through the legal process, we have some important notes for you. The first of which is the importance of communication, keeping your financial advisor aware of potential lawsuits can help them better serve your needs. Going to court is an expensive process and you’re going to want to make sure that you’re staying on top of keeping open lines of communication regarding your finances. The motivation behind this goes beyond the simple reality that more communication leads to more knowledge.
The accounting side of this judicial process is the forensics of it all. When filing a personal injury claim, both your accountant and the defendants lawyers are forensic accountants. These accountants serve to verify the financial need from wrongful death, loss of employment, and personal injury cases. These accountants assess individuals based on any factor of their life that financially impacts them from your income to the tax averages of your area. It is helpful to think of them as investigators, given that the nature of their work is less client service related and more purely focused on investigating finances when further review is requested.
Here at Interactive Accountants, we make it our mission to be as educated on the possible needs of our clients as possible, and this is especially true when considering legal matters. The best advantage anyone can have in legal matters is starting with a good understanding of their case and all the financial aspects involved in it.
While the process of claim to payment unfolds, the lawyers have a good chunk of bookkeeping to do on their end to make sure that everything is up to standard and address the progress of their firm. By using key performance indicators (KPI), which we addressed in a previous article that can be found here, a law firm can determine the actual profit they are seeing. Most offices use some type of software to complete this task by measuring various factors from employee hours worked pay ratios to reported expenses. Firms use KPIs to not only assess their performance, but also to evaluate their clients. A piece of advice we recommend is to take some time to look over notable KPIs in the event you are involved in a personal injury case, it may give you some additional insight.
Here at Interactive Accountants, we have studied many performance indicators and understand the math behind what determines if a firm is profiting off of a specific case or not. We are also educated on the tax laws attached to law firms and personal injury suits and understand the unique needs and challenges that each client will have.
As we advance, we want to help you understand what happens in a personal injury lawsuit and how to be aware of this process and how to take advantage of it. Individually we would love to consult with you and your business to help create an effective business strategy to address your individual concerns and help you succeed.
At Interactive Accountants, helping businesses grow and succeed financially is our number one goal. We are here to help! If you're still not convinced yet to give us a call, feel free to look at our other blogs regarding the help we offer various businesses and offices.
If you are a professional in any field that these tips apply to, schedule a free consultation here with our owner Matthew Shiebler, CPA. He's been practicing accounting for over 25 years now and is a business owner, just like you!