All You Need to Know About Structured Settlements

structured settlements information legal payment schedule

Although most cases result in lump sums, there are situations where structured settlements can be more favorable. Such as where the harmed is to receive millions. You need to understand structured settlements and how they work to manage the payment.

Learn all the basics about structured settlement below.


What Are Structured Settlements?

Structured settlements are a series of payments to the plaintiff who wins a case. It's structured because it is contract like with specific terms and conditions. The most common cases where structured settlements apply:


Personal Injury

These are cases where the plaintiff incurred an injury. The court rules that the defendant caused the harm.

The cause of the harm compensates the victim through a structured settlement plan. The defendant pays the money out in portions to cater for medical bills and other costs.


Workers’ Compensation

Structured settlements apply where a worker gets injured while on duty. Through the structured settlement, the worker can foot the hospital bill. This also covers the wages where the employee can’t report to work.


Medical Malpractice

Where doctors cause injury or death. A court ruling will demand the doctors to pay the individuals or their families. This usually takes the structured settlement option.


Wrongful Death

The families receive streams of income from the defendant. The payments are tax-free and should cover the deceased’s income.


How They Work

Structured settlements work like annuities. This means that the parties sign a contract. The wronged person receives a regular payment from the defendant through an insurance company.

The defendant makes periodic payments to the plaintiff (harmed individual). There are three options for the mode of payment. One, the payment can start immediately, if the wronged individual needs urgent medication.

Next, one can postpone the payment to after retiring. This happens where victims are not incapacitated; they still have their income. However, the annuity continues to earn interest during this waiting time.

The other option is for the annuity to be paid for the rest of your life or an X number of years. You can as well state whether the payments should increase or decrease over the payment term.  


Pros of Structured Settlement

  • The payments, the interest earned, and dividends are tax exempted. Only punitive damages and attorney’s fees are taxable.
  • Your next of kin continue to receive payment in case of death
  • The payment options are flexible on dates and tenure. You can also state if you want a lump sum payment at some point.
  • Structured payments are larger than lumpsum settlements.

Cons of Structured Settlement

  • The terms of payment can never be re-negotiated once everything if signalized
  • One cannot invest the payment in yielding a higher interest rate. As well, the money is not accessible immediately for emergency use.
  • You can only withdraw at the age of 59 ½. Or else pay surrender charges and IRS penalties for withdrawal before this age.

Smart Structured Settlements

These are the basic concepts of structured settlements. This guideline educates you on where structured settlements are applicable and how to go about it.

If you are considering a structured settlement, take advantage of the flexibility of payment and the terms. This will help you better manage your structured settlement.

Don't forget to bookmark our site to never miss our latest posts!

The Lean Startup Life Media Network Newest Blog Posts: