Are Structured Settlements a Good Idea?
In a personal injury case, both parties can agree to a settlement. Most settlements get paid as a lump sum. However, some are paid as a series of payments known as a structured settlement.
You might wonder if a structured settlement is a good idea. The answer is that it depends. To help you decide, let’s look at the details and pros and cons of a structured settlement.
What a Structured Settlement Means
If you accept a structured settlement, you get regular payments over a specific period. You’ll receive the money for a set number of years.
For example, say you win a $100,000 settlement. You might get $10,000 per month for 10 months. Or, you might choose to get payments twice a year or yearly.
Structured settlements can be helpful after a catastrophic injury with serious, long-term damages. You can choose how you receive your settlement payments. Here are some of the most common options.
Large First Payment
This structured settlement starts with a large initial payment. Then, you’ll receive smaller payments after that.
A big primary payment can help pay for high medical costs and living expenses. The smaller subsequent amounts can help cover losses like missed income.
Low to High Payments
You might do best with a structured settlement that increases over the years. For example, you might get lower payments at first. As time goes on, your payment amounts increase.
High to Low Payments
If you expect your needs to decrease in the future, you might choose this option. The structured settlement starts high and gets lower over time. For example, you might know your income will probably increase. So, you won’t need as much as you do initially.
Rather than getting the settlement right away, you might choose to delay the payment. For example, maybe you want to wait until you reach retirement age.
Annuity for Structured Settlements
To get a structured settlement, most people will buy an annuity from an insurer. The at-fault party transfers their payment responsibility to the insurance company. Through the annuity, the insurer pays your settlement amount over time.
It’s essential to make sure the annuity covers all of your expected costs. You and your lawyer should carefully anticipate your current and future expenses. From there, you’ll know what a fair settlement would be.
Pros and Cons of Structured Settlements
Should you accept a lump sum or structured settlement? Before deciding, discuss the best option with your lawyer. Let’s examine the pros and cons.
Pros of a Structured Settlement
There are two possible pros of structured settlements over lump sums:
- Structured settlements keep you from spending the money too fast. Even if you’re careful with money, it’s easy to use up a lump sum settlement too soon. If that happens, you might have nothing left in a few years when you need it.
- You pay fewer taxes on structured settlements. The government cannot tax the settlement money you get (26 U.S. Code Section 104). However, you might have to pay taxes on interest or dividends. A structured settlement pays out less at a time, which can mean fewer tax payments.
A structured settlement can also help if you have severe or disabling injuries. If you have high future medical costs, future payments can help.
You might also be able to combine a lump sum with a structured settlement — this can help pay for direct costs plus additional income over time.
Structured settlements can also help both parties reach an agreement. If negotiations aren’t going well, structured payments might help you settle sooner.
Cons of a Structured Settlement
Although structured settlements have advantages, lump sums are most common. That’s because, with a lump sum, you get the money now. You might have medical bills and other costs you need to pay.
With a structured settlement, you’ll have trouble paying for significant upfront expenses. If you’re unable to work because of your injuries, structured payments might not be enough.
A structured settlement is also problematic if what you win isn’t very big. Structured payments would not give you much of an advantage. Plus, annuity payments might no longer be large enough if the economy changes over time. Other disadvantages of a structured settlement include:
- A structured settlement is usually better for the paying party. You’re stuck waiting for payments instead of getting the money all at once.
- The payments might not be enough. Medical bills are often unpredictable. You might discover that the structured payments aren’t enough to cover your treatment and living costs each month.
- You have less control. Waiting for regular payments strips you of power. Your options are less limited compared to a lump sum structure.
So, Is a Structured Settlement a Good Idea?
A structured settlement is often the best idea, but this is not always the case. Regular payments might seem nice, but they could leave you at a disadvantage.
Opting for a lump sum settlement gives you more power and control over your money. However, even if you prefer a structured settlement, you have options. If you need the money now, a structured settlement loan can help.
Learn Your Pre-Settlement Loan Options Today
You might worry about choosing the wrong type of settlement. If you have significant expenses and cannot work, waiting for any payment is stressful. Even with a lump sum, insurance companies tend to take their time paying you.
If you need money now, Silver Dollar Financial can provide a pre-settlement loan. Instead of waiting for small payments over time, you can get your full settlement value now. Plus, you only have to pay us back if you get a settlement.
Here’s how it works:
- You click the Apply Now button at the opt of the page. Fill in the information about your situation.
- When we get your application, we’ll examine your case. We can provide up to $100,000. (And we do not look at your credit score to approve you.)
- If you get approved, you’ll receive your structured settlement loan. We pay you as soon as possible, and we can approve you within 24 hours.
If you received a structured settlement but need your money now, call Silver Dollar Financial. To get started, click the Apply button above to call (844) 871-0628.