If you’re entitled to receive a payout or settlement in a court case there are a number of options available for you to examine.. A full payout in one lump sum might not be the most viable option for you.
There are a range of benefits for recipients to consider a structured settlement instead. However, you may be asking: ‘What exactly is a structured settlement?’ And how can it work for your lifestyle?
In this article, we will explain how they’re designed and the flexibility it can bring to your future and income. This is especially important if you will be relying on this money for income or to recoup any lost earnings through injury.
How Does a Structured Settlement Work?
If someone decides on a structured settlement it means that their payout or money they’re owed is through a broker or loan company. They then provide periodic payments. The term for this is an annuity settlement.
There are different options available for how the payment plan can be set up. For example, you can choose to delay the payments for retirement or later on in life if you would prefer the money at a later date.
Whatever your financial requirements or needs are, deciding on how to claim cash for structured settlement is flexible and completely catered to your needs.
Common Cases That Use Structured Settlements
There are different circumstances that would result in claimants choosing to use a structured settlement. This is opposed to a full payout.
One of the most common reasons for structured settlements is personal injury claims. The accident may have resulted in significant medical rehabilitation and medical costs. The recipient might have several surgeries to pay for which need spacing out or paid for in installments.
Worker’s compensation is another example of when people would use structured settlements. This can cover medical bills and loss of earnings whilst the claimant recovers. This is when a worker is injured on a job or worksite and is unable to work due to their injuries.
Wrongful death suits can also be used as structured settlements by the family affected by the wrongful death The periodic payments will act as an income and revenue stream that will replace the loss of earnings from the person in their family that have lost their life.
Medical malpractice is caused when doctors make life-altering mistakes in surgery and either injure or cause fatalities to their patients which could have been prevented.
Structured settlements can be used to replace income from injured parties who can no longer work, due to medical malpractice. Or deceased patient’s families can claim on their behalf.
What Are the Benefits of Structured Settlements?
One of the main benefits of structured settlements is that the payments you receive will be entirely tax-free. They’re treated, somewhat, as private assets and you won’t have to pay tax on any of the payments.
This isn’t the case if you choose a lump sum. If you decide on a lump sum agreement you will be liable to pay taxes on the amount you receive. This will drastically affect the amount of money you end up receiving.
The tendency with large payouts is that you receive all the money at once and spend through this money at a lot quicker rate. This is especially poignant if you are going to have to use this money as a main source of income.
With regular and periodic payment it is much more consistent and regulated. You can design a payment schedule that is ideal for you and your lifestyle, knowing that the money won’t run out or be spent.
You can even choose to delay your payments or defer them for a number of years. Whilst this payment is deferred, your settlement money will continue to gather interest.
This might be money you will save as a retirement plan or for future medical expenditures. It is a plan which you can schedule to your own lifestyle and needs so you aren’t left without finances later on in life.
You can even schedule certain payment increases or benefits as time goes on. For example, if you know you are planning an around the world trip for your 50th then you can release more cash for that year.
Structured Settlements and Legacy
If the worst happens and the recipient of the structured settlement dies, this doesn’t mean that the payments are lost or stopped.
The recipient’s heir or designated heir will continue to receive the structured settlements even if this happens, completely tax-free.
This is why structured settlements can be a real benefit to a family over a longer period of time. A family member shouldn’t feel pressured to take a lump sum due to their age or health complications. Especially if that lump sum is subjected to an increased amount of taxation which is lost through the process.
The settlement is able to help and recompensate lost earnings for any length of time over a period of years, or even decades. It allows flexibility of a person’s spending habits and prevents the temptation to make huge, extravagant purchases in one go.
Structured Settlements: Where Can I Find Out More?
We hope that this article on what exactly a structured settlement is was helpful and provided you with the information you needed.
The great thing about structured settlements is that it allows the recipient a larger amount of money over an extended period of time. If you don’t have upfront medical bills to pay it can be the most sensible option for many people who want a consistent income.
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