Wed. Jun 7th, 2023

are structured settlements a good idea

Are Structured Settlements a Good Idea?

Structured settlements provide injured plaintiffs with regular payments over an agreed-upon time frame to help meet life milestones and other events that arise as they recover.

While structured settlements can provide an effective means for managing large sums of money, it is essential to remember that they don’t give you complete control of it – only accept one if you feel secure that the funds can be handled responsibly.

1. They are a good way to manage a large sum of money

As individuals receive large sums of cash quickly, the temptation may arise to make poor financial decisions with it. Structured settlements offer an ideal way of handling such sums over time while providing more stable income sources and minimizing the chance that too much will be wasted on frivolous expenses.

Structured settlements are an excellent solution as they can be tailored to fit almost any need. You could opt for payments that correspond with your paycheck, or arrange for a lump sum payout for expenses like college tuition for your children.

Structured settlements offer another key benefit – tax-free payments to plaintiffs are considered restorative rather than income by the federal government, thanks to the Periodic Payment Settlement Act of 1982 which doesn’t count them toward gross income calculations.

Structured settlements offer more than tax benefits; they also make it easier to be more deliberate with how you spend your money over time. By receiving periodic payments over time, structured settlements make it simpler to be more thoughtful with how your money is used.

An award from a structured settlement can help you get back on the right financial track and protect against emergency situations that threaten to impact your future.

Structured settlements may also help relieve some of the strain associated with managing debt and lacking enough money to pay it off on schedule. You could sell off a portion of your structured settlement to cover short-term needs while continuing to receive payments to help pay off your debt and remain on track.

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Structured settlements offer a straightforward method for receiving large sums of money, but it is important to understand both their advantages and disadvantages before determining whether they are right for you. To make sure that your money is managed wisely, seek help from an experienced financial advisor so your structured settlement is managed correctly.

2. They are a good way to protect your assets

Structured settlements offer an effective solution for people who have won large sums to manage their payouts more efficiently. They consist of periodic payments over an agreed-upon number of years that are tax-free for recipients.

There can be numerous advantages to structuring settlements for yourself or an employee, but not every situation calls for one. Therefore, it’s essential that you carefully evaluate whether this option would suit you before making your decision.

One of the primary advantages of structuring a settlement agreement is providing protection from creditors. This helps safeguard your family finances.

Structured settlements also eliminate any risk of investment loss by having funds managed by an insurance company. While this reduces risks significantly, it means you can’t use your settlement money for investments with high returns.

if you are contemplating a structured settlement, it is crucial that it is set up and administered correctly. As this may be difficult for some individuals, seeking guidance from experienced attorneys and financial planners may help.

Structured settlements offer another significant benefit: they help you avoid becoming “cash rich, but cash poor.” This occurs when those who receive large awards do not use them wisely and instead start spending it lavishly or investing it into dubious investments.

People injured in accidents who cannot work or afford medical bills often turn to brokers to sell their structured settlement for cash, though this may be a dangerous and unwise choice.

State laws have been created to provide protection for people who are injured and using structured settlements to secure the future income needs of their families. They ensure that such payments are utilized properly without being misused by unscrupulous companies or people lacking the expertise or resources necessary to keep clients protected.

So it is essential that you consult with a professional who can offer guidance and avoid being duped by scam artists. Though some companies buy structured settlements at reduced costs, always shop around until you find one with which you feel comfortable dealing.

See also  Reasons to Sell a Structured Settlement

3. They are a good way to protect your future income

Structured settlements offer an effective means to safeguard future income by producing a steady stream of tax-free funds that you can rely on as you meet your goals and achieve financial security. Furthermore, structured settlements allow flexibility that meets individual needs while meeting overall goals.

Structured settlements typically provide you with an initial lump sum and then smaller periodic payments over time, making them especially helpful if you need to cover large medical bills or are having financial difficulty due to an injury.

Your payments can begin immediately or you can choose to defer them until later – giving you control. Furthermore, larger sums may be provided when needed most – for instance when going through major life changes or paying off a large debt.

Although structured settlements can be an appealing solution for many people, they do have potential drawbacks that should be considered prior to signing any contracts or making decisions regarding them. One potential problem is how they could interfere with eligibility for public benefits like Medicaid or SSI if that is applicable to you; it would be prudent for you to consult a lawyer regarding possible solutions before making decisions in this regard.

Unfortunately, you have no control over where your money is invested; only the judge can approve selling future payments as an option.

Unscrupulous companies may buy up your structured settlement and invest it at much lower returns than you could on it yourself. They may purchase it for a percentage of its value; however, this typically is much less than you could have earned with it as a lump sum payment.

Structured settlements may be beneficial to those with high levels of debt who require steady income to cover expenses, but they can also be expensive and complicated solutions. You should discuss your situation with a qualified attorney or CPA to determine if structuring the payment may be the most suitable approach for your circumstances and family.

4. They are a good way to protect your family’s future income

Structured settlements are an effective means of compensating families claiming their loved one was murdered wrongfully, providing tax-free payments as income for survivors.

Traditionally, damages paid out in personal injury and other lawsuits came as one lump sum at settlement or judgment, leaving plaintiffs (and their families) to manage a large sum intended to provide for future medical and income needs.

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Structured settlements, however, are intended to meet changing financial needs while protecting from creditors and outside forces. A structured settlement can include both up-front cash payments and deferred payments over time to pay attorney fees, medical expenses or debts over time.

Structured settlements offer claimants a tax-free income that can help offset costs associated with physical or mental disabilities, and may help maintain eligibility for means-tested benefits like Social Security Disability or income-based Medicaid.

An insurance plan can also protect a person’s future income from creditors such as credit card companies or medical bills, and can be tailored to meet various needs, such as paying off debt, purchasing a house or car and funding a child’s education.

Structured settlements also have the added advantage of making it more difficult for non-recipients to access your funds – making them even more valuable in case of bankruptcy, divorce or any unforeseen occurrences.

Finally, it is essential that if you receive an award through a structured settlement, there are certain federal and state laws which protect you against unscrupulous companies. Some such companies offer to purchase your future payments for an upfront lump sum fee with discount rates typically ranging between 9-18 percent of the value of your settlement award.

If you are seeking a structured settlement, it is wise to seek legal advice from an experienced lawyer with knowledge of the law. They will make sure that the terms are tailored specifically to you and meet all applicable regulations; furthermore they can assist with selecting an affordable payment schedule which ensures the security of future generations.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.