What is a Structured Settlement?
Instead of receiving the settlement in one lump sum, an annuity is purchased to pay the plaintiff regular payments over a set amount of time, which can be for a short or long-term period of time. This annuity protects the settlement funds from risks and fluctuations associated with traditional investments.
Though every case is different and based upon the plaintiff’s individual needs, there are both pros and cons to structured settlement annuities.
Cons of Structured Settlements Annuities
Subject to Taxes
While structured settlement annuity payments for personal injuries are tax free, some parts of a settlement can be taxed. This includes punitive damages and attorney’s fees.
Once the terms of a structured settlement are agreed upon and finalized, there is typically no renegotiation if someone’s financial situation changes.
No Immediate Access to Funds
Because the settlement is paid over time, if an emergency arises and money is needed immediately, structured settlement recipients do not have instant access to their money.
Pros of Structured Settlements Annuities
Typically Receive More Money
In many cases, structured settlement recipients will receive more total money over time than they would if they opted for one lump sum.
Lump Sum & Periodic Payments
While a structured settlement may be beneficial to your needs over time, in some cases a plaintiff may need a lump sum for an immediate need. For those that need immediate access to a portion of their settlement, some settlements can be drafted to include a large sum up front with the remaining balance divided into structured payments received over time.
Selling Your Annuity Payments
For structured settlement recipients facing financial trouble, they have the right to sell some or all of their structured settlement annuity payments. By selling future payments, it allows recipients access to their money from a settled case more quickly.