A structured settlement is an arrangement within which financial rewards acquired from a lawsuit, insurance claim, lottery and the like are paid in installments over a period of time rather than being availed to the individual or individuals in question as a single lump sum payment.
The idea of structured settlements did not come into being until the 1970s; before this period of time, financial gains, especially from personal injury lawsuits, were paid out to defendants in large lump sum amounts.
And while this initially proved beneficial to the recipients in questions, many of whom where then able to meet their medical bills, legal expenses and the like, a great many such recipients simply lacked the mental acumen to skillfully manage sums of money of such a great magnitude.
It was for this reason that regulations were put into place encouraging the necessary institutions and authorities to make payments in installments, the idea being to prevent the recipients from spending their financial rewards in a poor and inadvisable manner.
Most structured settlements will, in most cases, include a large upfront payment to allow the recipients to meet their bills with cash, with the remaining balance then paid out in installments; it isn’t uncommon for structured payments to continue throughout a person’s life time, proving essential as a stable source of money.
+Pros of Structured Settlements
-Structured settlements are not restricted by death. In the event that the recipient’s life ends, their designated beneficiaries can expect to continue receiving tax free payments.
-With structured settlements payments are fairly flexible and can be scheduled to encompass any length of time, beginning immediately or deferred for a few months and even years.
-Structured settlements are not impacted by fluctuations in the market; the future of one’s payments is guaranteed by the insurance company which was responsible for issuing the annuity.
+Cons of Structured Payments
-There is no place for adaptability; once the terms are finalized regarding the payment structure, there is no room for altering them to meet any changes that might occur in one’s needs. Renegotiation is not an option.
-There is no immediate access to the entirety of one’s funds, which can prove troublesome in case of emergencies or when investment options emerge.
-If you choose to buy an immediate annuity, you are also choosing to lose your lump sum payment option
The question of structured settlements, specifically whether they will prove beneficial or not typically depends on the need in question; one cannot deny the fact that managing a massive inflow of funds at one go can prove difficult.
However the idea of restricting one’s access to their financial rewards to pre-determined installments over a period of time can prove irritating to some.