Written on Aug 9, 2013 9:29:00 AM
Can a Structured Settlement Benefit Me?
The situation of a structured settlement can be a complicated one. The simple words of “structured” and “settlement” can create a complex web of confusion. But it does not have to be a hassle. Even if you have only heard of a structured settlement through television advertisements, learning about it and what it can do for you now can help you in the long run with your individual situation.
When asking yourself if a structured settlement can benefit you, it is best to know both sides of such an agreement. What is a structured settlement in its most basic form? What are the benefits, and the downsides? How does your specific situation relate?
What is a Structured Settlement?
At its most basic definition, a structured settlement is an agreement that is outlined in a way that fits both parties according to the particular situation. The situation involves personal injury cases or even catastrophic injury cases. The two parties involved are the defendant and the plaintiff. In a case, it is the plaintiff who was wronged in some form, and thus the defendant pays the plaintiff in a structured settlement. The structured settlement can be paid in many forms, the most common ways being cash paid in full, or a payment plan that can be agreed to last anywhere between years to the entirety of the plaintiff’s life. The payment plan is called a structured settlement annuity, and the money usually goes toward related medical expenses or the expense of basic living needs.
A structured settlement involves a contact, which at times can become confusing and complex. Speaking with your attorney can help diffuse the complexity. The agreements of the structured settlement can be made privately or with the utilization of a court order. The agreement can be very flexible, meeting both of the parties’ needs. An annuity is known for its affordable price and flexibility, and is thus the preferred method of payment. The payment’s amount and schedule can be determined by the victim’s cost of expense, and can be measured with an attorney or a structured settlement consultant.
Situations of a Structured Settlement
Structured settlements are preferred in the different situations of many cases, including:
- Cases involving individuals with disabilities, both temporary or permanent
- Cases involving minors
- Workers’ compensation
- Wrongful death in which the family needs regular income
- Severe injury
Examples of structured settlement cases include those who have been wrongfully victimized. One such hypothetical example exists if a young girl and her friends were playing outside and got attacked by an unprovoked dog. The owner of the dog is the defendant and the girl is the plaintiff. A case like this would involve money for medical expenses up until an agreed date.
Pros of a Structured Settlement
When deciding whether or not you want to opt for a structured settlement in your case, it is best to understand both the benefits and the drawbacks. The benefits of a structured settlement include:
- The plaintiff may be provided with a substantial tax benefit. As long as the plaintiff does not control the funds, the funds from an annuity are free of tax.
- The plaintiff will have more flexibility in their payments over time. While a lump sum may provide temptation to spend all at once, a structured settlement is more likely to be used throughout the duration of the provided payment plan.
- Structured settlements are managed by a professional, and are thus distributed and managed by someone who knows how to completely work with them.
- As a plaintiff, your specific needs will be met, as annuities can be personalized for the plaintiff’s individual needs.
- Annuities, in most states, are protected by state insurance laws.
- An annuity can be combined with a lump sum payment.
- A structured settlement can benefit a plaintiff and their recovery in the event of a medical advancement. If the plaintiff wants to try a new scientific development related to their injuries, their plan has the flexibility to do so.
- The most important benefit is security. With the structured settlement supplying long-term income, the victim and their loved ones can rest easy knowing that they have help with the extra expenses of compensation. A secure settlement is a safe settlement.
Cons of a Structured Settlement
Sometimes, a structured settlement may not be the best option for your situation. This decision is all yours. Some drawbacks of structured settlements include:
- The IRS may see the need to forfeit the tax benefit if the plaintiff retains too much control over the money.
- Unknown changes in the economy could diminish the annuity payments.
- Some brokers do not have the sufficient protection needed; be sure that your annuity is placed with a professional and trustworthy broker.
- Once the structured settlement is set into place, the periodic payments cannot be borrowed against, deferred, accelerated, changed, or otherwise modified afterward.
- While the default risk is small, the selected life insurance company may be unable to make the payments. To combat this, the settlement money can be spread among various life insurance companies to lessen the risk.
How to Get a Structured Settlement
When getting a structured settlement, the first step is to speak with a professional manager of structured settlements or a personal injury attorney. Speaking with an individual who deals with structured settlements often can answer any questions or clarify any aspect. An agreement must be reached between the two parties of the plaintiff and the defendant, and the proper procedures must be taken, according to the third party involved.
Remember: A Structured Settlement is an Option
There are many ways to settle a case, and a structured settlement is only a single option. Talk with your attorney or a structured settlement expert to help decide if a structured settlement is the best route to take for your specific situation. For some, a lump-sum payment would be a better option. It all depends on the particular situation and your status as a plaintiff or a defendant.
No matter which route you choose, know that the choice is yours. With this knowledge, if you feel that the structured settlement would benefit you in your individual situation, then do what you feel is right. Understanding how a structured settlement works beyond the brief mentioning of them in commercials helps construct your future. No matter which side of the structured settlement you are on, know that there are resources out there to guide you and help you through the situation. For any and all questions about structured settlements and how they can benefit you, you can always contact a personal injury attorney.