Structured Settlement Pros and Cons

In tort law, the plaintiff typically has two options when it comes to receiving his or her settlement: they can take one lump sum or take chunks of payments over a certain amount of time. The latter is called a structured settlement. It is usually offered in the instance that a defendant can’t pay all at once. A structured settlement can also be requested by the plaintiff at the behest of his or her accountant. Typically, lump payments are considered income and are taxed heavily. A million dollar settlement could easily be slashed in half or more. With a structured settlement, you get to hold on to more money. Here are some structured settlement pros and cons.

One structured settlement pro is that you can hold on to more of the money. When you set up a structured settlement, the money is usually held in an annuity account that is protected from taxes. This is a great way to build a retirement fund, because the money may mature. Not only do you get to keep more of the money, but you may also make more money over time.

A disadvantage to structured settlements is that you won’t see all of the money right away. Of course, one disadvantage of structured settlements is that you won’t see all the money right after you win your settlement. With a lump sum payment, you will get a check. Some of it will have to go to your lawyer and court fees, but most of it will be in your bank account. With a structured settlement, you may have to wait a long time to receive your first check.

However, one of the best structured settlement benefits is that the settlement can be sold if you decide that you need the money. There may come a time when you are hard up and need some cash. If this is the case, your structured settlement may be more of a source of frustration. However, if you visit a firm, like the Dolphin Asset Group, they may be able to purchase your structured settlement. Of course, you will have to be okay with forfeiting some of your settlement during the sale, but it may be worth it if you really need the money. For instance, if you are late on mortgage payments and they are threatening to take away your home, you may need to secure your entire settlement.

Lastly, a big con of structured settlements is that they are more affected by the fickle winds of the economy. If you do put your settlement into some kind of investment account, you could risk losing it all. Of course, you will want to do your research about the investment firm, but you never know if the economy will take a hit. You could put your settlements into a certain account and it could be slashed in half as a result of a downturn. Ideally, you want to put the money into some kind of bonded annuity account that is better protected, but you still have a sliver of a chance of losing some of it. In the end, though, you really want to think about what’s best for you when you are deciding between a taking a lump settlement and accepting a structured settlement.