The Advantages And Disadvantages Of A Structured Settlement

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If you've hired a personal injury lawyer to handle your personal injury lawsuit, there's a good chance that your case will never go to trial because the defendant, or their insurance company, offers a settlement. The two most common types of settlement options include lump-sum settlements and structured settlements. It's important to talk to your lawyer to decide what option will be the best solution for your case.

What is a Structured Settlement?

A structured settlement is a settlement that involves paying the total sum of money in multiple installments over time instead of paying a single lump sum. These settlements are often used when a settlement involves a large sum of money, and these settlements may be created through the purchase of annuities. Structured settlements may work in several ways. You may be paid installments annually for several years, or you could receive lump payments every few years.

The Advantages of a Structured Settlement

Structured settlements offer numerous advantages over lump sum settlements. Some of the advantages to consider include:

• Structured settlements often provide excellent tax benefits. When structured settlement payments are received from annuities, they are tax free as long as you do not control those funds. However, you'll need to claim lump-sum settlements on tax returns because they are considered income.
• Structured settlements can help you preserve your funds throughout the period of your disability, ensuring that you have the money needed for your care.
• Structured settlements often help close the gap in settlement negotiations, since the defendant isn't required to pay the total settlement in a lump sum.
• Annuities can be tailored to meet your specific needs.

The Disadvantages of a Structured Settlement

It's also important to be aware of the disadvantages that come with structured settlements. A few of the disadvantages to consider include:

• Structured settlements may not meet your immediate financial needs, and you may need as much money as possible right away to pay for current medical bills, rehabilitation costs, and loss of wages. In some cases, it may be possible to combine a structured settlement with a lump-sum payment, which may help eliminate this problem.
• Certain payment structures may be tough to change in the future, even if changes are necessary.
• It may be possible to increase your long-term return by taking a lump-sum settlement, investing it yourself. Many investments often result in better returns than the annuities that are used for structured settlements.

Structured settlements are a viable option, but they're not the best choice for everyone. It's important to have a quality attorney like McCready Garcia & Leet P.C. to help you decide whether a lump-sum settlement or a structured settlement will be your best settlement option.

8 January 2015