Did you know there are over 40 million lawsuits filed each year? If you filed a lawsuit and got a settlement, you might be entitled to a structured settlement.
If you’ve heard you might get a settlement; you might be confused and asking, “What’s a structured settlement?” Continue reading this article, and we will give you a simple guide to understanding more.
What a Structured Settlement Is
The most common reason someone might get a structured settlement is due to things like personal injury, worker’s compensation, medical malpractice, or wrongful death. Since these payments are usually large, it became popular to spread the money out so people would have a consistent flow of income.
Make sure to read information from this site, and others like it to learn how to avoid scams when it comes to your settlement.
Keep in mind that these settlements can be confusing and come with complex regulations.
Pros of Structured Settlements
People love getting an annuity settlement payment because they are tax-free. You get to keep the whole payment, and you don’t have to worry about putting money aside for taxes because of the type of payment it is.
If the person receiving the payment dies, the heir may keep getting funds. Another big bonus is that recipients can choose when to start getting their settlement as well as whether the payments go up or down over time.
When you don’t have a big lump sum of money sitting at your disposal, it decreases your temptation to spend on some big item. It also makes it easier to plan out your finances since you know you can depend on these funds to stay consistent.
If you have to choose between a structured settlement and a lump sum payment, this is a good option if you don’t think you have self-control.
Cons of Structured Settlements
Once you agree to the settlement terms, you can do very little to back out of those terms. If you need money from your settlement, your hopes of getting what you need are dim.
Since you don’t have liquidity, if you need money right away, you’re stuck until your next payment. The only option you have is to sell your settlement to get a lump sum.
Keep in mind that some parts of the settlement can be taxed. There are a lot of interesting terms you have to pay close attention to. It’s a good idea to ask your attorney and see if there is anything you need to look out for.
If you get an unexpected tax bill when you’re on a fixed income, it can put you in a bad financial position that you might not be able to get out of.
A Full Understanding of Structured Settlements
Now you understand more about structured settlements and how they work. With this information, you’ll be able to move forward with confidence.
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