Structured settlements have been growing in popularity in recent years. This is likely because they offer several benefits over other settlement options. If you consider a structured settlement, it is essential to understand what they are and how they work.
What Are Structured Settlements?
Structured settlements are payment arrangements made between a plaintiff and a defendant in a personal injury lawsuit. The settlement structure is predetermined, often with regular payments scheduled overtime.
This type of settlement can be advantageous to plaintiffs because it guarantees them a steady income stream while also providing tax benefits.
The use of structured settlements began in the early 1970s to compensate victims of catastrophic accidents. Over time, their use has expanded to other cases, including medical malpractice, employment law, and product liability suits.
There are several reasons why plaintiffs might choose to receive their damages through a structured settlement:
- They want guaranteed income for life.
- They don’t want the money upfront.
- They don’t want to pay taxes on the total amount at once.
- They need long-term care and income for dependents, such as children with disabilities or elderly parents.
Structured settlements are established through private agreements between parties that include both plaintiffs and defendants.
In most cases, insurance companies represent large corporations accused of wrongdoing or negligence in causing an injury to a customer or employee, who then file suit against them seeking damages from their injuries (losses).
There is no government involvement in setting up structured settlement payments except when courts use them as part of criminal restitution orders.
How Do Structured Settlements Work?
Structured settlements work by providing periodic payments to the plaintiff instead of a one-time lump sum payment. This type of settlement is usually used in personal injury cases, medical malpractice suits, and wrongful death claims.
The advantage of a structured settlement is that it provides stability for the injured party. Especially if they will need long-term care or have a chronic illness. It also allows them to receive future payments without fear of compromising their financial security.
The downside to a structured settlement is that it can be less financially lucrative than a lump sum payment. In some cases, the defendant may offer a lower amount to avoid paying out over time. Plaintiffs should always seek legal advice before agreeing to any settlement.
How to Sell Structured Settlements
Selling your structured settlement can be a complex process. There are many factors to consider, and you must have all the facts when making this decision. If you decide to sell your settlement, here are some tips:
Find out if there is a market for selling structured settlements in your area by contacting companies who buy them or doing an online search on Google. These companies may offer free consultations so they can determine whether or not they would like to purchase yours.
Do research into how much money you could receive from selling these assets before deciding which company will give the best price possible. It would help if you also tried calling around different brokers and comparing their prices against each other before choosing one to work with.
Take advantage of the tax benefits that come with selling your settlement. If you were planning to use those funds for something other than living expenses, such as paying off debt or investing in stocks and bonds, this might be an added incentive to sell now rather than later because it could save many years’ worth of taxes!
If you decide not to sell but still need cash fast, then some things can help speed up converting future income streams into present value terms.
Using a structured settlement annuity broker specializing in these types of transactions will ensure they have experience working with people like yourself who may already know their needs and want someone else’s assistance getting them started.
Selling only part instead of all at once while retaining ownership over some rights allows you to keep more control. Especially when determining what happens next with your settlement.
If you want less contact between yourself and the buyer, hiring an intermediary may be worth considering. That’s because they represent both parties. Hence, there’s no need for direct communication at any point during negotiations.
The disadvantage here is that it could take more time if one side needs something from another person, instead of having only two people involved where everything can get done faster.
Structured settlements are a great way to receive your compensation. However, it is essential to note that they have their own set of disadvantages. Therefore, you should consider the pros and cons before deciding if this is the right option for you.