What to expect when settlement funds are issued in Alabama

Short answer: How you receive settlement money depends on who the check is made payable to, whether your attorney has a lien or is handling the check, and whether special steps (court approval for a minor or a government benefit lien) are required. Most commonly, the insurer issues a check either directly to the claimant or jointly to the claimant and the attorney. If an attorney receives the check, they will deposit it in a client trust account, satisfy liens and costs, then send you the net proceeds by check or wire after the funds clear and any required approvals are complete.

Detailed answer — step‑by‑step process in Alabama

1. Who is the check payable to?

There are three typical possibilities:

• Payable only to you (the claimant): The insurer plans to send the check directly to you. You may be asked to sign releases or complete tax or identity paperwork before the insurer mails the check.
• Payable jointly to you and your attorney: This is common when you have a contingency fee agreement or the attorney has an asserted lien. The attorney generally endorses the check, deposits it in the attorney’s client trust (IOLTA) account, then handles distribution.
• Payable to other parties or to a third party: Sometimes medical providers, Medicare/Medicaid, or a lienholder must be paid directly, or a court may require a settlement to be paid to a guardian or conservator. These situations add steps before you get net funds.

2. If your attorney receives the check

Alabama attorneys must safeguard client funds. When an attorney receives settlement money, the usual flow is:

1. Sign and return any settlement documents or releases required by the insurer.
2. Attorney deposits the check into a client trust (IOLTA) account rather than the lawyer’s personal account.
3. Attorney pays out medical liens, subrogation, outstanding case costs, and the attorney’s fee per the contingency agreement.
4. After funds clear and outstanding obligations are resolved, the attorney issues the net proceeds to you — typically by check or by wire transfer if you request and provide banking details.

3. If the insurer sends funds directly to you

If the check is made payable only to you, you will receive it by mail (or rarely by overnight delivery). Expect to be asked for:

• Signed release forms;
• An IRS Form W-9 if requested by the insurer;
• Proof of identity.

Before depositing a check, confirm whether your attorney or any medical provider has a claim that should be paid from the settlement. If you cash or deposit a check without resolving liens, you may still remain legally responsible to those claimants.

4. Special situations that change how funds are handled

• Minor or legally incapacitated person: Alabama courts often require court approval for settlements on behalf of minors or incapacitated persons. That can delay distribution until the court signs an order approving the settlement and distribution plan.
• Medicare or Medicaid: Federal Medicare law and Alabama Medicaid rules may entitle those programs to repayment of medical expenses paid on your behalf. Resolving Medicare/Medicaid liens or conditional payments can delay distribution.
• Outstanding liens or subrogation claims: Medical providers, auto insurers, or employers may assert liens. Attorneys usually negotiate or resolve those claims before distributing net funds.
• Structured settlements: If you elected an annuity or structured settlement, you’ll receive periodic payments rather than a single lump sum.

5. Timeline — how long will it take?

Typical timelines vary:

• If no liens or special approvals are needed: a few days to 2 weeks after the insurer issues the check (allowing for deposit and bank clearance).
• When liens, Medicare/Medicaid issues, or court approval for a minor are present: several weeks to a few months depending on negotiations and court schedules.

6. How will you actually get the money?

Common distribution methods:

• Physical check from your attorney or the insurer mailed to your address;
• Bank wire or electronic transfer if you provide account information and request it;
• Direct payment to third parties (medical providers, lienholders) with the remaining balance to you;
• Court-ordered disbursement when court approval is required.

Practical steps you should take now

• Ask who the check will be payable to and where it will be sent.
• Request a written distribution statement showing attorney fees, costs, and any lien payments before you accept funds.
• Provide any requested W-9, identification, and signed releases promptly to avoid delays.
• If you prefer a wire transfer, provide the attorney with a secure routing and account number and confirm any bank fees.
• If you believe government benefits or a lien applies, ask your attorney to confirm how those claims will be resolved.

Helpful hints

• Do not endorse or deposit a jointly payable settlement check without discussing it with your attorney first.
• Get a written accounting when your attorney disburses settlement funds — it should show gross recovery, fees, costs, liens paid, and your net amount.
• Ask your attorney how long they will hold funds in the trust account and when you will receive your check or wire.
• If you have Medicaid or Medicare, ask whether your attorney will handle the repayment process or whether you need separate action.
• Consider tax implications (e.g., part of a settlement for lost wages or punitive damages may be taxable). Consult a tax professional if needed.
• If you are a minor, ask whether the court must approve the settlement and how that will affect timing.

When to consider contacting a different lawyer or asking questions

If you do not get clear answers about who will receive the check, why payment is delayed, or how liens and fees will be paid, ask your attorney in writing. If your attorney will not provide a clear accounting or you suspect mishandling of funds, contact the Alabama State Bar for guidance on client trust account rules and filing a complaint: https://www.alabar.org/for-the-public/.

Disclaimer: This article explains common practices in Alabama and is for general informational purposes only. It is not legal advice and does not create an attorney‑client relationship. Consult a licensed Alabama attorney about the specifics of your case and any statute or court requirement that may apply to your settlement.