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Structured Settlement vs Lump Sum: What’s the Difference?

Do you feel you’ll have to file a lawsuit against someone to compensate for personal injury?

If so, you’ll have to decide on whether you’ll want to get compensated with a structured settlement vs lump sum payment. Both of these types of payments have their advantages, but once you settle on one, you can’t request any changes.

This short guide will break down the differences between a structured settlement and a lump sum payment so you can decide the better option.

Here’s what you should know.

Structured Settlement

With a structured settlement, you’ll organize a deal to receive a set number of payments over a course of a few years. You’ll receive a fixed rate with each payment.

You can save a lot of money on taxes if you receive payments via a structured settlement. This is crucial if you want to ensure that you have more savings to assist you with your personal injury. As a result, this is often the most popular option for many plaintiffs.

The disadvantage is that you might take a while to earn sufficient compensation. If this is your scenario, then you can still use a service such as to secure more funding.

Lump Sum 

If the long wait stresses you out, then you might want to consider the lump sum agreement.

With this option, you agree to receive a quick one-time payment following a lawsuit. The advantage of this scenario is that you’ll receive money without having to wait for it.

However, you can expect to receive a huge tax bill following the lump sum payment. There’s also a chance that you won’t receive the amount that you’d like.

You might have to choose whether you’d want to earn $1 million over a decade or $500K within a year of winning the lawsuit. You want to consult with your lawyer on which is the better situation for your needs.

Increasing Your Savings

You’ll find that even with both types of settlements, you might not receive the compensation you’ll need. You might need extra money to compensate for your personal injury.

As a result, you’ll need to have proper financial planning to ensure that you have supplemental income. You want to build multiple streams of income.

No matter what, make sure you find ways to reduce your tax burden legally. You also want to save your money and live a frugal lifestyle. This ensures that your personal savings and the settlement will help you after the injury.

Choose Between Structured Settlement vs Lump Sum

Now you can choose between a structured settlement vs lump sum settlement after your lawsuit.

With a structured settlement, you’ll receive a large payment over a long period of time. This helps you save on taxes and is often easier for the defendant.

With a lump sum payment, you’ll receive your payment in one go. However, this might incur a large tax bill and you might not receive the amount you need.

Make sure you always read up on financial planning in case the compensation isn’t sufficient. You can find more information on financial planning on our website.

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