The Advantages and Disadvantages of Structured Settlements

					The Advantages and Disadvantages of Structured Settlements

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Short review:
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.


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structured settlements,structured settlement,cash for structured settlement,sell structured settlement



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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posted:7/3/2011
language:English
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