structured settlements

If you are being awarded a large sum of money due to winning a personal injury or civil case there are two ways you can receive the funds.

You can choose to take all of it as a settlement lump sum or decide on a structured settlement. Either option has benefits, but structured settlements are quite popular.

Here is what you need to know when considering the pros and cons of this plan.

What Does Structured Settlement Mean

The basic structured settlement definition is the money is paid out over time in regular installments. It’s like a payment plan for the insurance company.

The installment details are extremely flexible and payment is arranged to best suit your potential needs. Do you need more money now to get back on your feet or want to spread it out?

There could be a large one-time payment at first, and then smaller payments on a regular schedule. The amount can even increase or decrease over time depending on the financial need.

Pros and Cons of Structured Settlements

After winning a substantial sum of money, some people want to collect it all at once. They may have been struggling financially while the case was being settled and have medical or other bills to pay. The idea of having money sounds great.

The problem arises when someone doesn’t use their money wisely and it runs out way too soon. Structured personal injury settlements allow for both the payment of current bills and still provide ongoing support for years to come.

When the award is for a minor, some suggest taking a lump sum for investing purposes. However, you need the help of a professional financial advisor.

Some worry that the money will run out and they should take it all at once. The truth is, many defendants will purchase an annuity and that company will take on the obligation of making the payments.

For those still concerned about needing money right away, there are options for cashing in early on a portion of the settlement. Companies like will buy some of your future earnings to allow you immediate funds right now.

Managing Your Money

Regardless of whether you take a one-time lump sum or a structured settlement, you need to learn how to manage the money.

It can be tempting to use it for things unrelated and end up back in a bind. There are also other people who will hear of your settlement and come asking for help themselves.

While most personal injury settlements are tax-free, there are some exceptions and you must be informed of how this will impact your total amount.

There are things like paying off bills, future medical treatments, starting a savings or retirement account, or paying for college that should come first. Trust your advisor to steer you in the right direction.

The Decision Is Yours

When you win a sum of money it is your decision whether to look into structured settlements. Research the pros and cons of your unique situation and always do what is best for you and your family.

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