Understanding structured settlements

February 2, 2010

One of the most common uses of structured settlements is in personal injury claims. Through the settlement, the victim is compensated for their personal injuries, but rather than a lump sum payment, a structured settlement is an agreement that the defendant or the defendant’s insurance company will make periodic payments to you over a set period of time.

Structured settlements offer considerable tax advantages. Earnings on your structured settlement are tax-free. Tax liabilities can greatly reduce a large cash payout. By contrast, the principal and interest generated from structured settlement annuities are completely exempt from state and federal taxes.

Another benefit of structured settlements is the flexibility they offer. You can structure your settlement in a way that best meets your financial needs and protects you from inflation. A structured settlement can consist of simple yearly payments or can be a complex arrangement involving an initial lump sum payment and monthly indexed payments.

You are free to structure your personal injury settlement in the way that is most beneficial to you. You can even tailor your personal injury settlement to meet your long-term financial goals such as a steady source of income to support you during retirement or paying for your child’s college education.

Long-term money management issues are another reason why personal injury victims often prefer structured settlements. With a structured settlement, you are guaranteed a steady source of income to cover your future medical expenses. Some personal injury victims do not feel confident in their ability to manage a large cash payment to ensure that their ongoing medical costs are provided for. A structured settlement can alleviate those concerns.

Before accepting any settlement offer, you should seek the advice of an experienced personal injury attorney. Your personal injury attorney will make sure that you are fairly compensated for your injuries and can negotiate on your behalf to get you the best settlement possible.

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