There are a lot of advantages to choosing a structured settlement over a lump sum award. Most importantly, structured settlements are guaranteed to provide for the future needs of the injured party receiving the payments. Actually, most of the time, a structured settlement will provide for the personal and medical needs of an injured person for their entire lifetime. Lump sum awards, on the other hand, sometimes end up being wasted through poor investment strategies, overuse, and the ups and downs of the stock and investment market. The American Association of People with Disabilities endorses structured settlements, arguing that they could be the best and safest means of being sure an injured person who wins a tort case is provided for throughout their lifetime.
The second advantage of the structured settlement is the unique way it is managed by the tax code. More often than not, annuity payments are untaxed, meaning that more money makes its way into your pocket. Lump sum payments, in contrast, can incur a substantial tax burden which can mean that you will defintiely end up paying more taxes in the end.
Structured settlements also offer very much flexibility. In reality, no two structured settlements are the same, because each one is arranged to take into account the specific present and future needs of the injured party. For instance, several people will have the desire to receive a small annual sum, while others may want to receive several larger sums spread every few years or arranged around significant life events. Structured settlements could also be arranged to provide more money for the claimant later in life or more money as the claimant’s medical condition worsens. There are no limits to the different possibilities of the structured settlement, because it is a private arrangement between claimant and defendant.
Lastly, structured settlements have a number of exceptional advantages which end up increasing the net amount of award money for many people. For instance, your money cannot be reduced by divorce or the receipt of social security. Additionally, you may end up netting a larger award because you have to pay out less for lawyer and court fees incurred during a lengthy court battle.
You can also have the option to sell your structured settlement should you wish to cash out later down the road for a lump sum payment. There are many companies out there that specialize in this. Always take into account that companies who procure structured settlements from people have only one goal, to gain profit from their purchase, which is why occasionally their offers are a bit low. You can yet try approaching more than one company if you hope to sell a structured settlement, just to make sure that you get the highest payoff.
Ensure that the company who wants to buy your settlement is well established and well-funded. You do not want to trust your money to some fly-by-night company disappearing or going bankrupt even before paying you the buyout amount.
Ruth Rogers is a freelance writer that specializes in various financial topics like structured settlements, investments and money management.
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