3/30/2017

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Structured Settlements
(Advantages and Disadvantages)

Many people who win big lawsuits, hit it big with lottery winnings, or come into possession of large amounts of money in other ways, end up broke after two or three years of getting the money. As we all know, liquid assets flow like water, and once the spending spigot is turned on, it becomes very hard to turn off. That is why some people negotiate a structured settlement to alleviate the stress of handling large lump sums of money all at once.

Even being, there are definite advantages and disadvantages to taking money in a structured form of payment. Structured settlements may not fit the needs of some people, but for others, they may be best course of action in certain situations.

Advantages of a structured settlement:

  • Long term income
  • Reduction of income tax on the settlement amount
  • Peace of mind knowing that you have money tucked away that you can't spend until you get it in your hands
  • Income to pay for long term healthcare needs, if needed
  • Protection of assets
  • Cannot be taken during a divorce
  • Can be negotiated to meet your specific financial needs

Disadvantages of a structured settlement:

  • You may have eventually disagree with the original terms of the structured settlement
  • You can't anticipate what the future will bring, financially or medically
  • You may need the lump sum in the short term and can only get the money as agreed to in the settlement
  • You may want to invest the money yourself, getting a higher return on the investment
  • You may want purchase or pay for a big ticket item but can't put your hands on the money
  • You may have to pay large commissions to set up a structured settlement

People like structured settlements because of tax free payments that allow them to retain more of the money over a long period of time. It also allows companies to pay lower taxes, also.

Structured settlements are considered good for minors who can have their money paid to them well into adulthood. In the past, a minor's money may have been squandered due to excessive spending and poor management by a parent or guardian.

As with all large monetary transactions, you should seek the advice of a qualified attorney. Certain states require that an attorney be consulted but give you the option of obtaining or waiving legal representation.

 

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