Sometimes in a claim, people opt to receive their financial reward in payments. It’s not that a lump sum isn’t available. Waiting for the total amount may take longer to receive.
That’s the gist of a structured settlement.
Settlements of this type benefit both the defendant and the plaintiff. The respondent gets a faster resolution, saving thousands on the cost of litigation. They also get to ensure all payments get paid on time.
The best part is the plaintiff receives guaranteed tax-free money that’s owed them. This financial security gives them peace of mind.
Are you trying to figure out how to get your money and if a structured settlement is a good idea? Read this article to learn more.
1. The Structured Settlement Process
When someone suffers an injury, illness, or death occurs at no fault of their own, they have a right to sue. They become the plaintiff who sues for compensation for their injuries.
To keep the lawsuit from going to trial, the defendant agrees to give money to the plaintiff through payments. In some cases, a judge may force a dependant to do so.
A qualified signee structures the terms of the settlement then sets up an annuity contract. The life insurance company who issues the annuity contract pays the plaintiff a series of payments.
2. Common Reasons for Structured Settlements
Plaintiffs receive settlement payouts for different reasons. Here are a few common causes for these types of settlements:
- Personal Injury
- Worker’s Compensation
- Wrongful Death
Payments from these common reasons provide the plaintiff with a fixed stream of income.
3. Pros and Cons
Most plaintiffs opt for structured settlements because of the tax benefit. The majority of personal injury settlement payouts are tax-free. Claimants also have the option to tailor their payments to take care of certain needs.
The flipside is choosing structured settlements does release you from paying attorney fees. Also, insurance companies don’t allow you to change the annuity once it’s funded.
If you withdraw from this type of settlement, expect the IRS to swoop in with penalties and fees.
4. Choose the Best Company to Get Your Payments
Choosing a company that handles structured settlements appropriately is like choosing a bank. You don’t just put your money anywhere. You look at their history and success rate in the community.
Read reviews!
Consider previous customer complaints. Don’t end up contracting with an unscrupulous company. Make sure they have a reputation for giving customers the highest offer on their payments.
5. How to Get the Most at Once
Plaintiffs have the option of getting all their money at once. It’s called taking the lump sum. People do this when they’re in dire straights for cash. They need to pay bills and put food on the table.
Whatever the case, this option exists. It is, however, subject to taxation—much more than going the payment route. Find out more about how to do it here.
Consider Your Options
A structured settlement is one way to go when you need a steady income after an injury claim. Before you take the lump sum, consider the benefits, and choose the best company for your payments.
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