What You Need to Know About Structured SettlementsStructured settlements in personal injury cases have many advantages and some disadvantages. While your lawyer should be the first one you ask questions, this blog guide gives you the basics.
What are structured settlements?
Structured settlements are when you get payments over a period of time, from a few years to your lifetime. This is paid directly to you and you rarely have complete control over the money, only the payments you get over time. You might be in a car accident and the settlement from the insurer covers a policy for you that lasts 10 years. These all vary, but what always happens is you get payments over time. You may have seen ads on television offering to pay all your settlement or annuity money in one lump sum; these are talking about structured settlements.
Advantages of Structured Settlements
While getting that lump sum like from the TV commercial may sound like a better deal than getting paid over time, the timing of the payments is one key advantage. It's very common for plaintiffs (those injured) to spend all their money from a lump sum in a matter of years. Even if you have discipline, you might be able to get more by getting a structured settlement. This money can also be tax free; all the money you get is untaxed as long as you do not control the money coming in.
Structured settlements are harder to blow because the funds are managed by a professional. Again, many might spend all this money, thinking more will eventually come in from a job. However, the best thing to do is plan for the future. To do that, you also need to be ready for moments you may need more money; a structured settlement can be created with a strategy for any expected problems you may have.
There are some other advantages to annuities and structured settlements. Your protected in most states by insurance laws, therefore you can expect the money. Also, in many cases a structured settlement can be a deal maker before you go to trial; some insurers prefer paying money in this way, bettering your chance of reaching an agreement.
Disadvantages of Structured Settlements
In some cases, you may have no tax benefits. If the IRS feels you have too much control over the money, you may lose that advantage. In other cases, you may prefer a lump sum in order to pay immediate expenses that the settlement simply cannot pay in time. Also, insurance companies can be difficult in how they handle structured settlements; they typically have to pay less for this, but won't disclose to you how much this settlement is really worth.
How to Get Help
As you can see, there are many more advantages to structured settlements than disadvantages. It's not always in your best interests, and does depend on where you are at financially. If you are still unsure, consult with your personal injury attorney. A good attorney can really make this process simpler.