Structured Settlement or Lump Sum Payment?

Structured Settlement or Lump Sum Payment?

OLYMPUS DIGITAL CAMERAWhen it comes to personal injury lawsuits, a win for the plaintiff can often mean that large sums of money are awarded for the purposes of covering damages. Medical expenses, property repairs, lost wages, and pain and suffering penalties can add up quickly. Many plaintiffs, therefore, are offered the option of receiving structured payments, as opposed to receiving a lump sum payment.

There are many advantages, but also some disadvantages to opting for structured settlements. It is important to carefully consider your decision before putting anything in writing. A St. Petersburg personal injury attorney should be able to provide you with the information you need to make an informed choice.

Benefits of Structured Settlements. For many people, it makes perfect sense to accept the structured payments. In order to know if this choice is right for you, there is much you should understand about structured settlements. Most personal injury plaintiffs will receive their settlements as lump sums, and for many it is for the best choice. However, for others, especially those who receive very large settlements, it makes better sense to receive the full amount in a series of smaller payments.

Structured settlements give the plaintiff an amount of control. The payments can be arranged how the plaintiff prefers. This person can choose the number of years over which the money will be paid. He or she can select how frequently the payments will made, and, thus, how much will be received with each installment. There is also the option to continue payments, after the plaintiff passes, to predetermined heirs.

Furthermore, structured settlements can be used as a sort of tax barrier. When large amounts are received as lump sums, the money is generally invested. The interest earned on that money is taxable. That can equate to large tax burdens each year. A structured settlement means that there is less interest on which to pay taxes.

This is also a way to ensure that the income is spent wisely. When receiving a lump sum, unfortunately, many plaintiffs will make unwise decisions that cause them to burn through the money far too quickly. With the structure in place, the plaintiff can receive the money needed to cover the costs of living without the ability to spend so rapidly.

Disadvantages of Structured Settlements. On the other hand, some Saint Petersburg plaintiffs would find that a structured settlement isn’t right because they cannot assume the small risk that comes with such a plan.

Structured settlements do come with slight risk because the defendant pays the full amount owed to an agency set up strictly to handle structured settlements. That agency then makes the payments as outlined in the agreement. If that agency then happens to file for bankruptcy, for one example, there is a strong likelihood that the remainder of the settlement would be lost.

For others, there simply isn’t enough money in the settlement to justify the structured payments. One must figure how much will be owed to the attorneys for their services, and then how much will be needed to settle the outstanding medical bills and other expenses. Often this sum can be paid up front, with the rest being handled through structured payments, but in many cases, there isn’t enough money left to justify the breakdown. It is important to discuss these factors with your personal injury attorney.