Structured settlements were introduced for personal injury cases. One can choose for payments through structural settlements instead of opting for a onetime cash payment. After an initial payment of an enormous sum of money for immediate needs, the claimant receives regular payments in the future for a specific number of years. However, it must be remembered that both structural settlements and lump sum amounts have their own pros. Therefore, you must decide which one of them suits your financial needs before finalizing the deal with the other party.
Advantages of Structural Payments
Some of the pros of structural settlements are listed below:
- Payments are guaranteed in case of structured settlements, through the purchased annuities.
- The payments received from structured settlements are exempt from federal taxes, state taxes, dividends, income taxes and capital gain taxes.
- Planning done with the help of professional consultants not only to meet present financial needs, but also to benefit from the arrangement in the future.
- No loss of funds unlike investments that depend on market conditions or from bad financial management.
- Individuals can still benefit from state, federal and private healthcare programs.
Structured settlements help you in magnifying your finances through annuities purchased from renowned insurance firms. This is because they help earn special interests. The whole concept of structural settlements is very flexible. Once an arrangement has been made between two parties, the claimant can choose to receive payments on specific dates, for an entire lifetime, monthly basis, quarterly basis, annually, semi annually, fixed or varying amounts or some form of combination of all of the mentioned options.
Cases in which Structured Settlements may be adopted
Structured Settlements can be implemented to various types of injury related cases, irrespective of the amount of money involved in them. As per Ethan from [company name], most cases involving structured settlements dealt by insurance firms involve funds that are less than $50,000. One may think of structured settlements to resolve cases dealing with injuries/accidents, compensation of laborers or breach of medical ethics and involve the following:
- Medical requirements for a long period of time.
- Permanent or temporary ailments/ disabilities.
- Juveniles or mentally challenged.
- Accidents involving heavy physical or brain damage and reduced life expectancy.
- Outlasting spouse or/and reliant in a case involving death.
Apart from the cases listed above, structured settlements are very widely used for cases involving different types of personal damages like loss of property, sexual molestation, divorce, illegitimate termination, differentiation and environmental damage.
Most commonly, the defendant party aims to address immediate needs of the claimant at first. As per Walter Hinds from (company name), such needs include provision for additional income source, payment of tuition fees, payments for mortgages, pension and to support present medical needs. After such needs have been satisfactorily addressed, other requirements such as down payments for new house or new car, renovation projects, remuneration for legal consultants, important tax payments and vacation expenses are considered. Since different individuals have different situations, it is very important for people to work with professional consulting firms in order to draft the structured settlements.
Choosing Structured Settlements over Lump Sum Payouts
The following are the reasons as to why people should choose structured settlements over onetime lump sum payments:
- Tax breaks are included in structured payments, as a result of which the person dealing with the money can be benefitted provided that the claimant himself/herself is not controlling the funds.
- Since structured settlements involve annuities, it becomes difficult to exhaust the money received through the payments within a short time frame. Studies on lump sum amounts suggest the fact that a majority of people who receive a onetime cash settlement, tend to exhaust the funds within 5 years of receiving it. After the funds are exhausted, such people seek government help in order to support their livelihood and to continue the medical treatment.
- Structured settlements involve a number of rules and regulations that enable the payments to be modified if there is a change in the financial/ medical needs of a person. Medical needs include latest treatment procedures and purchase of expensive equipments.
- Since most state laws are tailored in a manner that provides guaranteed annuities, an insurance company will still be required to pay installments to the claimant even if it is identified to be bankrupt.
- Structural settlements can be a good method to put an end to the disagreements between the petitioner and the litigant.
Structured settlements are mostly offered by leading insurance companies. So in that regard, structured settlements are the safest form of compensation for accidents or injuries. Many of these companies have been through several phases of depression or world wars and periods of severe recessions. As such, many of these companies have managed to exist post the Civil war in America.
Many people wonder if a structured settlement is the best option when compared to existing investment plans. The answer to this question is pretty simple. Since structured settlement payments are exempt from taxations, they provide better returns when compared to low and medium risk investment schemes. One must remember that higher the return, the higher is the risk involved in it. The reason for the growing fame of structural settlements can be attributed to the guaranteed share of the payment to a beneficiary, spouse or successor in case of the death of the primary claimant. Therefore people must choose structured settlements to avoid spending too much money within a short time period and to protect the payment from poor investment schemes.