Settlement Distribution & Client Recovery Statement

What a good one includes

• A clear declaration of the total gross settlement amount agreed upon by the employer or defendant.
• An itemized calculation of the attorney's contingency fees, showing the exact percentage and dollar amount deducted from the gross sum.
• A detailed list of out-of-pocket litigation expenses, including filing fees, deposition transcripts, and postage, supported by receipts.
• A clear breakdown of the tax characterization, separating taxable wages requiring withholding from non-taxable physical injury or emotional distress damages.
• Deductions for any outstanding medical liens, subrogation claims, or expert witness fees that must be paid directly from the settlement.
• The final net recovery amount to be paid to the client, along with the specific disbursement method and expected processing timeline.
• A formal sign-off section where both the attorney and the client execute the document to acknowledge and approve the financial distribution.

Common mistakes to avoid

• Falsely treating the entire employment settlement as tax-free, which can trigger severe IRS audits for both the client and the firm.
• Failing to provide itemized receipts for litigation costs, leading to disputes over generalized or unexplained administrative charges.
• Disbursing funds before resolving outstanding liens or third-party claims, leaving the client or attorney personally liable for unpaid debts.
• Omitting a clear explanation of how attorney fees are calculated if the case settled in stages or went through an appeal.

Frequently asked questions