Thursday, March 19, 2009

The Advantages of Taking A Structured Settlement

By Allie Sanchez

If you have recently won compensation following an injury of some kind or other then you may be given two choices when it comes to getting your money. The traditional route here used to be the payment of a lump sum of cash and that option is still available. But, more recently, more and more compensation winners have opted to take their money in a structured settlement.

Here, instead of paying out a lump sum of compensation, the company charged with making the payment can suggest that you take a series of individual payments instead. These payments can be paid over time to a structure that suits both parties, hence the name structured settlement.

Taking a series of regular payments rather than a lump sum can have a lot of advantages for you especially if you are still suffering from the effects of your accident or are having to care for the person who was hurt. The money that you are given here is designed to help you and your family cope with your needs for the rest of your life and having to deal with investing a lump sum payment can be an added stress or strain.

Many people also find that a structured series of payments also helps them budget their money more effectively. Having a large lump sum at your disposal out of the blue can make it easy to spend too much too quickly which doesn't tend to happen if you have a smaller budget to work with.

You are also given a say in how and when your payments are made. You could, for example, ask for an annual payment or for payments to be made every couple of years. Your payments are guaranteed here because the company making them will take investment measures (such as buying annuities) that will make the money available to you according to the structure you agree with them.

Taking this kind of staggered payment could also save you money in the long run. This kind of settlement often brings with it a series of tax advantages so the chances are you'll pay less tax by choosing this route than by taking a lump sum. In some cases your settlement could even come tax free.

You can also try to reach an agreement here that protects your family if you happen to die whilst your settlement is in place. Some agreements here, for example, can be set up to pay an end lump sum to your next of kin if you die unexpectedly. Or, as an alternative, you can ask for a guaranteed number of payments that must be made even if you die before your settlement is done.

Later on down the line you can also consider selling off your structured settlement agreement for a lump sum if you do decide that you would prefer more cash at once. There are companies in the sector who will buy settlements such as these although you may have some restrictions on whether you can sell on your own individual settlement so you'll need to check this out first.

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