Structured Settlement – Important Things to Know

What is a Structured Settlement?

When a plaintiff wins a lawsuit, personal injury case, or other legal action, he or she may choose to receive periodic payments from the defendant rather than one lump sum settlement. The payment periods of the structured settlement are agreed upon by the two parties and can be fairly frequent (every few months) to more spread apart (large sums paid every three years). This agreed upon cycle of imbursement is called an annuity. In the US, every state has specific laws governing structured settlement procedures. These laws can contain guidelines on protection and periodic payment statutes. Medicaid and Medicare regulations also govern these type settlements, especially personal injury claims. People can also choose to sell a structured settlement annuity if they want to receive their money at the present time.

Advantages of Structured Settlements

There are advantages and disadvantages to structured settlements that one must consider before opting to receive structured settlement cash. The main reason people agree to these pay plans is tax avoidance. By setting up a schedule that is spread out over long amounts of time, the plaintiff may reduce his or her tax obligations. Also, receiving structured settlement payments can sometimes protect against financial mismanagement and guard against relatives looking to get a piece of the sum. It is unfortunate, but sometime people who come into a large amount of money have trouble saving and spend freely. Without sound financial practices, even large settlements can dissipate quickly. Young people and those with chronic injuries may also benefit from assurances that they will be getting payments for several years down the line. For future expenses such as money for school or unforeseen medical treatment and equipment, the security of a structured settlement can be beneficial to those who want to ensure they have a steady supplemental income.

Disadvantages of Structured Settlements

For people wishing to make significant purchases (such as a car or home) or make further investments on their money, the long-term payment plans can be limiting. Thus, they may seek out a structured settlement buyer that will purchase their plan with cash paid immediately to the holder. It is difficult to use settlements as credit for future purchases and receiving cash now can prove a better strategy for people wishing to invest privately, which can yield greater returns. An inflexible structure for structured settlements can sometimes restrict a person’s options in determining the best manner in which to use their money. In addition, it is important to remember that annuities can be very profitable for insurance providers. The extra fees and commissions they charge for setting up structured settlements may be unreasonable, thus one should always consult a lawyer or structured settlement specialist to see if the prices are fair. The settlement is the plaintiff’s, after all, so a large chunk of the annuity should not go to a third party.

Additional Information

When agreeing upon the terms and conditions of your initial structured settlement or seeking out a structured settlement company, you should look out for those who try to inflate the apparent value of a structured settlement. Before determining the specifics of the structured settlement, it is wise to examine the prices and additional fees charged by different insurance providers. Insurance companies sometimes try to charge very high commissions for proving annuity payments. Also, when searching for companies that buy structured settlement, it is important to consult a lawyer and financial planner to determine if such an option is legally feasible and economically wise. Be sure to shop around for the best offers from multiple companies to find a structured settlement company that will give you the best deal. Talking to more than one buyer will give you a better idea about the proper value of your settlement, and it will also ensure that you get the highest possible amount if you choose to sell. Most importantly, be sure that the company that you patronize is insured, registered, and has a good reputation. Check their payment track record to make sure that they are prompt and responsible.