Many personal injury cases end in a settlement for an amount of money paid to the plaintiff. But instead of receiving a lump sum, many choose to receive a structured settlement. A structured settlement is a series of periodic payments scheduled to pay out over a set amount of time. Before you decide to receive a structured settlement, here are some things to know.


You’ll receive a steady stream of income.

In a structured settlement, the lump sum you would receive is split into payments over a period of time. Most people structure their settlement payments to ensure that they receive a guaranteed income for the rest of their lives.


Your payments are tax-free.

Choosing the lump sum may seem like it pays out more, but since it is taxed as income, you will lose a portion of it to taxes. Structured settlement payments are paid out by an annuity often purchased by an insurance company. Since the plaintiff does not control the annuity, the payments they receive are not taxed. As long as the structured settlement company retains control, the cash payments are tax-free, giving you more of the money than you would get in a lump sum.


The contracts are flexible—before they are signed.

You should always discuss your structured settlement with a professional before signing a contract. You can decide how often you receive your payments and how much to receive in each. You can make each payment amount equal, or you can set your settlement to pay out a lump sum periodically. Deferring payment is another option to consider: your settlement schedule could begin immediately, or you could set the payments to begin several years later, when you may need the cash more. Once the contract is signed, however, changing terms of your settlement is nearly impossible.


Payments do not adjust for inflation.

Economic fluctuation is inevitable, but future payments on a structured settlement do not adjust for inflation or any other changes in the economy. You can account for inflation by setting up larger payments further in the future. When scheduling your payment stream, be aware that the further away the payment is, the more its worth can decrease.


You can sell your structured settlement payments.

Your structured settlement contract may be difficult to alter, but you do have options if your payment stream no longer works for you. If you need cash sooner and cannot wait on your payment schedule, you can sell your structured settlement for a lump sum. You can use this cash towards emergency expenses, paying down debt, or other pressing financial needs. To discuss your options, call Novation Settlement Solutions at 1-888-610-1849 or use our online form today.


*Novation is not a financial advisor and/or consultant and strongly recommends that you speak to a lawyer and/or accountant before making any significant financial decisions.