When a personal injury case settles, the money does not go straight to you. The defendant or its insurer sends the check to your attorney, who deposits it in a client trust account, waits for the funds to clear, pays off attorney fees, litigation costs, and any medical liens, and then releases the remainder to you. That is how settlement funds are disbursed to clients, and the whole sequence usually takes four to six weeks from the day you sign the release, longer if a lien is still being negotiated.
The Path Your Money Takes
Your attorney cannot deposit the insurance check into the firm’s regular operating account. Professional conduct rules require client money to sit in a separate trust account, segregated from firm funds so that no creditor claim, bookkeeping error, or business trouble at the firm can touch it.1American Bar Association. Model Rules of Professional Conduct Rule 1.15 – Safekeeping Property These are commonly called IOLTA accounts, for Interest on Lawyer Trust Accounts. The attorney holds the money as trustee, not owner.
Once the check is deposited, the bank clears it. Federal banking rules let banks place extended holds on large deposits. For a check over $6,725, the bank must make the first $6,725 available on its normal schedule but can hold the rest for up to seven business days.2Federal Reserve. A Guide to Regulation CC Compliance Only after the funds clear does the firm begin paying out.
From the trust account, the firm writes checks or sends wires to every party with a claim on the money: medical lienholders, subrogated insurers, expert witnesses whose bills were advanced, the firm itself for its fee and costs. What remains is yours. The firm cannot release your share until every third-party obligation is resolved, which is why a single unpaid lien can hold up payment even when the money is already in the account.
What Comes Out Before You’re Paid
The number on your settlement agreement is not the number that lands in your account. Three categories of deductions come off the top.
Attorney Fees
Most personal injury lawyers work on contingency, taking a percentage rather than billing hourly. The standard arrangement is roughly one-third if the case settles before a lawsuit is filed, climbing to 40% after litigation begins. Cases that go through trial or appeal can push higher. Your retainer agreement states the exact percentage. Pull it out and read it before the settlement statement arrives.
Litigation Costs
Separately from the fee, the firm recoups out-of-pocket expenses it advanced: court filing fees, medical records charges, expert witness fees, deposition transcripts, service of process. In a case with several experts and heavy discovery, these can run into the thousands. Your settlement statement should itemize each one.
Medical Liens and Subrogation
If a health insurer, Medicare, Medicaid, or a workers’ compensation carrier paid for treatment tied to your injury, that entity has a legal right to be repaid from your settlement. Medicare’s right is especially aggressive. Federal law requires that any conditional payments Medicare made for injury-related care be reimbursed before you take your share, meaning money Medicare fronted while the claim was pending must come back once a settlement is reached.3Office of the Law Revision Counsel. 42 U.S. Code 1395y – Exclusions From Coverage and Medicare as Secondary Payer Private insurers assert similar subrogation rights under your policy. Your attorney typically negotiates these liens down before finalizing the numbers, which can add meaningfully to your net.
The Settlement Statement
Before any money moves to you, the firm prepares a settlement statement, sometimes called a closing statement, that accounts for every dollar. It shows the gross settlement at the top, then each deduction line by line: attorney fee, each cost, each lien, and finally your net. Read it carefully. If a charge looks unfamiliar, ask for the underlying invoice. You are entitled to see where every dollar went.
Paperwork That Has To Be Complete First
Three documents typically stand between you and the check. Delays here are almost always caused by missing signatures or names that do not match.
The settlement agreement and release is the core document. Signing it accepts the payment and gives up any future claim against the defendant arising from the same incident. Some jurisdictions or carriers require notarization. Every name must exactly match the legal identity used in the original claim filing. A maiden name, a stray middle initial, or an outdated address can trigger a rejection and add weeks.
If any part of your settlement is taxable, the paying party needs a completed Form W-9 with your correct taxpayer identification number. Failing to provide one, or providing incorrect information, triggers backup withholding at 24%, meaning the insurer withholds that share and sends it to the IRS. You would recover it when you file your tax return, but it ties up your money in the meantime. For settlements that are entirely for physical injuries, a W-9 may not be required at all since those payments are not reported on a 1099.
Finally, you will provide payment instructions: routing and account numbers for a wire, or a mailing address for a paper check. Double-check every digit. A transposed number in a routing string can send your settlement into the wrong account and create a recovery problem far worse than any paperwork delay.
How Long the Process Takes
The clock starts when you sign and return the release. Each phase runs roughly as follows.
- Insurance company processing: After receiving the signed release, most insurers take two to four weeks to cut the check and mail it to your attorney.
- Bank hold period: Once deposited, the bank may hold funds above $6,725 for up to seven business days.2Federal Reserve. A Guide to Regulation CC Compliance
- Lien resolution and final audit: The firm confirms every lien is satisfied and the settlement statement figures are accurate. If Medicare or a health insurer is still negotiating a reduction, this step alone can add weeks.
- Disbursement to you: A wire transfer typically clears within one to two business days. A mailed check adds three to five business days for delivery.
When everything goes smoothly, expect four to six weeks from signing the release to money in hand. Lien disputes, missing paperwork, or a slow insurance carrier can push that to two or three months. The biggest bottleneck in most cases is Medicare conditional payment resolution, which can drag on if the attorney did not request the payment summary early.
Wire Fraud Precautions
Wire fraud aimed at law firm trust accounts is a serious and growing problem. Criminals intercept email traffic and send fake wiring instructions that route settlement funds to accounts they control. Once the money moves, it is usually gone within hours.
Careful firms use dual authentication before sending client funds by wire. That means calling you at a number they already have on file to verbally confirm every detail of the instructions. A written reply to an email is not enough; the confirmation should be oral, ideally with someone whose voice is familiar. Any last-minute change to previously provided wiring instructions is a red flag and should be verified on a separate channel.4United States Court of International Trade. Wire Transfer Fraud – A Growing Threat to Law Firms
On your side, never email bank information without confirming by phone. If a message asks you to click a link to update wiring details, call the firm directly using the number from its website or your original retainer. The few minutes it takes could save your settlement.
If You Disagree With a Deduction
If a charge on your settlement statement looks wrong or a fee seems excessive, raise it immediately and in writing. Your attorney has an ethical obligation to keep any disputed portion in the trust account, untouched, until the disagreement is resolved. The undisputed portion, the amount both of you agree belongs to you, must be released promptly.1American Bar Association. Model Rules of Professional Conduct Rule 1.15 – Safekeeping Property
An attorney who refuses to release the undisputed portion while a fee dispute is pending is violating that rule. The first step is a written demand referencing the trust account obligation. If the firm still does not comply, you can file a complaint with your state’s attorney disciplinary board. Most fee disputes are resolved through negotiation, mediation, or a state bar fee arbitration program without reaching that point.
When Disbursement Works Differently
The standard process assumes an adult receiving a lump sum. A few situations change how the money is released.
Settlements involving minors. If the injured party is a child, virtually every jurisdiction requires a judge to approve the settlement and the fee arrangement. Courts do not simply hand the money to the parents. The most common arrangement is a blocked account: funds sit in a bank account no one can access without a court order until the child reaches the age of majority, 18 in most states. For larger amounts, the court may order a structured annuity or a trust with a professional trustee. These steps add time to the disbursement process.
Recipients of means-tested benefits. If you receive Supplemental Security Income or Medicaid, a settlement deposited directly into your bank account can push you over the resource limit and cut off benefits. The SSI resource limit is $2,000 for an individual and $3,000 for a couple.5Medicaid.gov. 2026 SSI, Spousal Impoverishment, and Medicare Savings Program Resource Standards The two main tools that protect eligibility are a first-party special needs trust and, for smaller sums, an ABLE account. Federal law allows a first-party special needs trust to hold settlement proceeds for a person with a disability under age 65 without those assets counting against SSI or Medicaid, though funds remaining at death must first reimburse Medicaid.6Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Planning has to happen before the check is cut. Once money reaches your personal account, you have already triggered a resource overage that can take months to unwind with the Social Security Administration.
Structured settlements. In larger cases, particularly those involving long-term injuries, you may be offered a stream of periodic payments funded by an annuity rather than a single lump sum. Periodic payments for personal physical injuries carry the same tax exclusion as a lump sum.7Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness The trade-off is inflexibility: cashing out early requires selling the payment rights to a factoring company at a steep discount, and federal law imposes a 40% excise tax on that discount unless a court approves the sale as being in your best interest.8Office of the Law Revision Counsel. 26 USC 5891 – Structured Settlement Factoring Transactions
A Note on Taxes
The amount you receive is not automatically all yours to keep. Damages for personal physical injuries or physical sickness are excluded from gross income, so a typical car accident settlement covering medical bills, pain and suffering, and related lost wages is generally tax-free.7Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness Punitive damages are always taxable, even in a physical injury case. Emotional distress damages not tied to a physical injury are taxable, as is back pay in an employment case, and interest earned on funds sitting in the trust account is taxable regardless of what the underlying claim was about.9Internal Revenue Service. Tax Implications of Settlements and Judgments Ask your attorney how each portion of your settlement will be characterized before you sign, because that characterization drives whether a 1099 is coming and whether you should be setting money aside for taxes.