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The_Advantages_and_Disadvantages_of_Structured_Settlements

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					Title:
The Advantages and Disadvantages of Structured Settlements

Word Count:
365

Summary:
A structured settlement is an arrangement where instead of a lump sum of
cash being awarded to a claimant, a tax-free periodic payment is agreed.
Structured settlements are often used in guardianship cases, workers
compensation cases, wrongful death cases and severe injury cases.


Keywords:
structured settlements,structured settlement,cash for structured
settlement,sell structured settlement


Article Body:
A structured settlement is an arrangement where instead of a lump sum of
cash being awarded to a claimant, a tax-free periodic payment is agreed.
Structured settlements are often used in guardianship cases, workers
compensation cases, wrongful death cases and severe injury cases.
Research has indicated that the more severe the injury, the more likely
it will be that a structured settlement will be used.

The first thing that you may be asking yourself is, what are the
advantages of taking a structured settlement over a cash settlement? The
first reason is that it offers long-term financial security and
protection to the plaintiff. It has been estimated that 90% of all large
cash awards are spent within 5 years due to poor financial management
skills.

The main advantage of structured settlements is the tax-free status of
the payments and capital growth. For an example, let us suppose that a
claimant has been awarded a settlement and can either take a $1 million
lump sum, or $2 million spread over their lifetime. If they opt for the
$1 million, although the sum itself is tax-free, any interest earned on
it will be liable to income tax. However, the $2 million paid over their
lifetime will not be liable to income tax.

One of the disadvantages associated with structured settlements is the
perceived inflexibility of its structure. It is not possible, for
example, to add your spouse's name to the settlement agreement without
the exception of a court order. If the claimant is risk averse, they may
believe that they can create a higher yield by investing the money
themselves. However, it can also be argued that the monthly payments of
the settlement give the investor a great way to "dollar cost average"
their investments.

If you are awarded a structured settlement, there are companies that give
you the option to sell structured settlement payments for a lump sum cash
fee. In this situation, you should always seek the advice of a trusted
attorney. In recent years, this type of transaction has become
increasingly popular and has resulted in more than 35 states and the
federal government increasing consumer protection statutes and setting in
place strict rules and regulations for these types of transactions.

				
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