Structured Settlements

What are the benefits of a structured settlement over a lump sum payment?

Personal injury claims settlements (the most common) can be paid in a single lump sum. The problem with that is that claimants don’t necessarily know how to manage such a large payment-an amount that is intended to provide a lifetime of financial needs. If a lump sum is not properly invested, or worse yet spent too quickly, there will be little available for day-to-day needs as well as long term needs.

Some of the advantages are:

• Security
• Guaranteed long-term income
• Tax-free benefits
• Flexibility

Personal injury claims are the most common, as stated above, but structured settlements can be set up for:

• Lottery or sweepstakes winners
• Lawsuit settlements
• Medical settlements
• Accident settlements
• Insurance settlements

What are structured settlements?

In 1982 Congress began to encourage the use of structured settlements as a way to provide guaranteed payments over time instead of receiving a lump sum. This is usually handled through the purchase of an annuity. Even the IRS has determined that since the money is compensation for an injury, both the principal and the interest are tax-free. Lump sum payments are also tax-free but you will pay taxes on the income from investment, unlike with a structured settlement.

Why should you consider a structured settlement?

You can schedule the payments however you would like-for a short period or your lifetime, paid monthly or even yearly. When you work with a structured settlement consultant you can go over all the variables and find the right schedule for you. There are many things to consider when setting up a structured settlement or opting for a lump sum payment, including if the claimant is not of legal age to make their own decisions. If the claimant is a minor most likely the court will order a structured settlement within the judgment.

• Tax-free payments
• No worries about medical expenses and cost of living needs
• Can handle long-term needs such as rehabilitation or permanent care
• Long-term financial security

Why would someone offer to buy your structured settlement?

This is very common as this type of offer pays less than the full amount of the settlement so you can walk away with a lump sum. Check with your attorney before making any decisions. In fact, 28 states have passed consumer protection statutes that establish strict conditions for how these transactions can take place

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