Workers’ Compensation Settlements & Estate Planning

Across the board, the significant majority of personal injury lawsuits and workers’ compensation claims are resolved through settlement. The reasons for the high percentage of cases that settle are myriad. Our crowded court system and resulting delays can wear down litigants; the increase in alternative dispute resolution helps cases resolve before trial; the inherent unpredictability of trials and hearings incentivizes settlement. The list goes on. One factor that is seldom discussed, however, is estate planning. People who have suffered injuries at work or through the fault of another are rightly concerned with the financial well-being of their loved ones once they are gone. Many times, this is the driving motivation for plaintiffs agreeing to settle their claim prior to a hearing.

The importance of estate planning in injury settlement deliberations is clearer once you consider the perspective of the injured person.

Consider the situation of someone seriously injured on the job.

Let’s say that a 40-year-old worker (we’ll call him “Dave”) is injured to the extent that he can no longer work again. That would mean that Dave would have a work comp claim for Permanent and Total Disability, or PTD. Let’s say that Dave, when he was working, made 600 dollars a week, gross. If the employer and work comp insurer disputed Dave’s claim, and he were to pursue the claim through a hearing and win, the workers’ compensation insurer would then be responsible for paying Dave wage-loss benefits equaling 2/3 of his wages on a weekly basis through age 67, with scheduled adjustments. Over time, this would amount to a significant number – well over $650,000.00.

Now let’s say that prior to the hearing, both sides meet in mediation to discuss settlement. Dave happens to have a strong case – he has an experienced work comp attorney representing him; he is a good, credible witness; he has excellent medical documentation to support his injuries; his treating physicians are willing to testify on his behalf; the judge assigned to the case has a reputation for siding with injured workers; and the defense’s case is weak. It would seem that Dave would have no reason to settle his case for less than its full value.

But what if Dave were to unexpectedly die before age 67? And what about Dave’s loved ones? What would happen to all that money? Dave has to realize that, as a general rule, his work comp case and the benefits he would have coming to him are his alone – they do not pass onto his dependents or surviving loved ones. In one sense, the benefits die when Dave dies.

This does not mean that there are no “death benefits” in Minnesota work comp law – there are.  However, they are different in nature than the wage-loss benefits owed to Dave – they are “inchoate.” Essentially this means that for Dave’s purposes, while he is alive, any potential death benefit for his dependents does not yet exist. Whether or not his loved ones might receive death benefits (and how much those benefits might amount to) is entirely unknown.

There are too many legal factors to describe here in detail that contribute to the unknown nature of potential dependency benefits in any given Minnesota work comp case. But the most important one is tied to common sense: we don’t know the ultimate time or cause of our death. Therefore, in Dave’s case, he doesn’t know whether his death will be causally related to his work injury. There simply are NO dependency benefits available in the work comp system if the work injury is NOT a contributing factor in the cause of death. So, if Dave were to pass away from causes totally unrelated to his work injury, there would be no “death benefits” available to anyone.

This is the insecurity that often drives settlement. It is a truism that we fear the unknown, but even more anxiety-inducing is the uncertainty of the future of those who depend on us. Many times, in the context of a workers’ compensation case, the only way to make certain that your loved ones will be provided for in the future is to remove the variables and take a cash settlement.

As mentioned earlier, there are many factors that enter into settlement considerations, all of which should be discussed with an experienced work comp attorney. Obviously, a good attorney will guard against giving up too much value in settlement negotiations for money now – it is never a good idea to make fear-based decisions or dwell too much on “what-ifs.”  But it also is important to remember that court proceedings can be a gamble, and the risk of not being able to provide for loved ones is a serious concern.

This is where estate planning and workers’ compensation often dovetail. Should someone in Dave’s position ultimately choose settlement, a good work comp attorney can suggest ways to invest or structure settlement money so that it lasts and provides security for the client’s loved ones.