Understanding Structured Settlements: A Path to Financial Stability for Personal Injury and Wrongful Death Cases

A structured settlement is a financial arrangement often resulting from a civil lawsuit, where the settlement winner receives both a lump sum payment and ongoing periodic payments.

These periodic payments are designed to meet the specific needs of the winner, ensuring financial security over time. In many cases, structured settlements also include compensation to cover immediate expenses, offering stability while safeguarding long-term financial health.

The Periodic Payment Settlement Act of 1982: Safeguarding Victims’ Financial Future

In 1982, the U.S. government enacted the Periodic Payment Settlement Act to protect those awarded settlements in personal injury and wrongful death cases. This legislation provides financial protection by ensuring tax-free payments over time, offering a safety net for claimants. It enables them to receive structured, guaranteed payments designed to last for years, or even for life, avoiding the financial risks associated with lump-sum payments.

What is a Structured Settlement Annuity?

In many personal injury or wrongful death cases, the defendant may choose to purchase an annuity to fund the settlement. This option provides benefits for both parties: the defendant can transfer the financial responsibility to experienced insurers, and the claimant enjoys long-term financial stability through regular, tax-free payments.

How Do Structured Settlements Work?

Settlements can either be paid in a single lump sum or as structured settlements with periodic payments. The main difference lies in taxation and long-term security. With structured settlements, the money grows tax-deferred, and the claimant enjoys a steady income over time, as opposed to a lump sum, which may be spent quickly and may result in tax obligations on any earned interest.

Types of Structured Settlement Cases

Common cases that lead to structured settlements include:

• Personal injury cases
• Car accident injury claims
• Workers' compensation
• Medical malpractice
• Wrongful death claims
• Maritime injuries
• Railroad accident cases

Structured Settlements for Minors

In cases involving minors, the settlement money is typically held in trust until they reach adulthood. Until then, their parents must adhere to court orders on how the settlement funds can be used.

Should You Opt for a Structured Settlement or a Lump Sum?

Choosing between a lump sum and a structured settlement depends on various factors such as settlement size, financial management skills, and tax considerations. It's crucial to seek guidance from your personal injury attorney or a financial advisor who can help you make an informed decision.

Understanding Annuity Contracts, Lump Sum Settlements, and Taxes

Both settlement options have their pros and cons. Structured settlements provide guaranteed, tax-free payments, ensuring financial security over time. Lump-sum payments may offer flexibility but come with the challenge of managing large sums, including potential tax burdens. Your attorney can help you evaluate which option best suits your financial goals.

Financial Management Experience and Know-How

If you're unsure about how to manage a large lump sum, structured settlements may offer peace of mind by providing steady income without the risk of poor financial decisions. Financial advisors and attorneys can help you navigate these decisions to secure your future.

Are You a Spender or a Saver?

If you're concerned about managing a large sum of money, a structured settlement may be a safer option. It ensures you have access to ongoing funds, helping you avoid the temptation of spending too quickly.

What Will the Settlement Money Be Used For?

Structured settlements allow you to create a tailored payment plan that can accommodate your long-term financial needs, such as healthcare or living expenses. Payments can be customized to suit your individual circumstances, with flexible options for timing, amounts, and even delayed payments.

Benefits of Structured Settlement Payments

Key benefits of structured settlement annuities include:

• Tax-Free Payments: Structured settlements are typically tax-free under Section 104(a) of the Internal Revenue Code.
• Long-Term Financial Security: You receive guaranteed income for the agreed-upon duration, with payments unaffected by market volatility.
• No Investment Fees: Unlike traditional investments, structured settlements don't carry fees or risks associated with market performance.

Need Immediate Cash? Explore Pre-Settlement Funding

If you're in need of financial assistance before your structured settlement begins, a Pre-settlement Cash Advance can provide quick access to funds. This option is designed to help you cover urgent expenses while waiting for your settlement to be finalized.

Call us today at 888-474-8473 or Apply Now for Pre-Settlement Funding!

Disclaimer: The content provided here is for informational purposes only and does not constitute legal or financial advice. Please consult with a qualified attorney or financial advisor for personalized guidance regarding your settlement options.