What Do You Need to Know About a Structured Settlement?
Forty-nine states in the U.S allow structured settlements. Plaintiffs expect compensation when they initiate a court case against their defendants.
However, the compensation amount is sometimes too hefty for the defendant to pay as a lump sum, and that’s how the idea of structured payments comes in.
A structured settlement is a flexible payment method. It allows the defendant to make periodic payments for the lawsuit, instead of paying a lump sum. The payments are tax-free, and also, they do not change with inflation or any other economic change.
Keep reading to learn more about structured payments.
How Does a Structured Settlement Work?
When you accept the structured payment, your total compensation amount will be spread out for a specified period.
For instance, let’s assume that your compensation was $4,000. In that case, you might agree to receive $500 every month until the entire payment is fully settled.
The defendant may decide to buy an insurance annuity, meaning that you will receive the payments through the insurance firm.
As mentioned here, the structured payment takes many forms; thus, the court might customize the amounts to meet your needs.
A life annuity is a lifetime period. Here, the defendant makes regular payment weekly, bimonthly, monthly, or even yearly until the plaintiff dies.
However, the annuity may have a specified period such as 30 years, meaning that the payments will be made regularly for those years, whether the two parties are alive or not.
Temporary Life Annuity
It works similarly to the life annuity. The only difference is that the payments stop when you die, hence, the beneficiaries do not get anything from the fees. This option is the most realistic, and also, the most popular in the United States.
The deferred payments are made in milestones. The defendant only pays when the plaintiff urgently needs money. The special funding plans for the deferred option could include medical expenses, college fees, and so on.
Structured Annuities Cases
Here are the main types of court cases which can be resolved through the structured payments:
- Personal injury cases
- Wrongful death cases
- Discrimination cases
- Workers compensation
- Sexual abuse cases
Pros of Structured Settlement
In line with the National Structured Settlement Trade Association, the flexible payments offer many benefits to the disabled, juveniles, and the people who sustain injuries. Here are the main advantages:
A regular flow of income – the plaintiff enjoys a consistent flow of income for a specified period or their entire lifetime
Tax benefits – as earlier mentioned, the payments are not taxable
A beneficiary may be allowed – some fees plans enable the beneficiaries to continue receiving the cash even when you are gone
Easy to sell– you may quickly sell the structured payments when you get an emergency, for instance, you may sell the amounts to settle and emergency medical situation
Understand Your Options
It’s essential to know your rights, as well as the available payment options for your lawsuits. If you have an injury case or any other case mentioned above, find an excellent structured settlement planner or lawyer to help you select the option.
The flexible payment will provide regular payments for a specified period, and your children or siblings might benefit as well.
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