What Is a Structured Settlement? 3 Things You Need to Know

What Is a Structured Settlement? 3 Things You Need to Know

Trying to understand what a structured settlement is? Not sure if you should take a structured settlement for your personal injury case?

If you’ve been involved in a personal injury lawsuit, then a structured settlement is one option that might come into play. A structured settlement might end up being the right choice for both parties and can help to resolve personal injury cases in a way that is agreeable to both.

So what is a structured settlement exactly? Below we’ll tell you about the top things you should know about structured settlements.

What is a Structured Settlement Payment?

A structured settlement is an agreement that states that a specified amount of money will be paid to a plaintiff to settle a lawsuit or personal injury claim. Instead of being paid in a lump sum, a structured settlement will be paid over a span of time in periodic payments, usually with annuity funding.

The specific cash amount of a structured settlement will be negotiated by the defendant and the plaintiff.

  1. Payments Will Be Steady and Tax-Free

The first thing you should know about structured settlements is that, once an agreement is made, the plaintiff will have a steady flow of income that will be tax-free. A lump sum is split up so that payments will be received on an ongoing basis over a long span of time.

As opposed to a lump-sum payment, these payments are tax-free. As a result, this means that although a plaintiff won’t be getting the money all at once, they will end up getting paid more overall.

  1. Structured Settlement Payments Can Be Sold

One of the most interesting things to note about structured settlement payments is that, if necessary, you can sell them later on. If you’re receiving structured settlement payments and decide to sell, this often means that you’ll end up getting less money for them overall. However, in some cases, selling your structured payments may be a good decision.

If you need cash for a specific large purchase or you need a large amount of cash for some other reason, then selling your structured payments might be an option you’ll want to consider. However, make sure you do your research. Look for the best structured settlement companies if you want to get the highest lump-sum payment for your structured settlement.

  1. Inflation Needs to Be Taken Into Consideration

Another important thing to realize about structured settlement payments is that although they will serve as a steady stream of income as time goes on, their value may decrease over time.

Structured settlement payments won’t be adjusted for inflation, so you’ll want to plan accordingly and you may want to have terms in the contract to account for this. You may want to set up larger payments later on in the structured settlement payment period.

Whatever you decide to do, it’s important to realize that the value of the payments will change as time goes on, so you’ll need to have a plan for dealing with inflation.

Final Thoughts

So what is a structured settlement? By now you should be starting to get a clearer picture of what structured settlement payments are and can decide whether they’ll be right for you. Be sure that you consider all of the aspects of personal settlements before making your final decision.

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