Most often a lawsuit will end with one side having to pay out a particular money amount to the other. With that comes two options of how the schedule of payment will work.

We may recognize the term but it is important to really understand what structured settlements are, how they work, and how they differ from a lump sum. Those details are illustrated below.

How A Structured Settlement Works

This is generally a four-step process;

• A plaintiff starts a suit for injury or illness or looks to file for a wrongful death settlement. As this process starts, often times a settlement, structured settlement being a choice, will be offered to keep this from going to trial.
• Plaintiff and Defendant work with an assignee to determine terms such as the size of payments and the schedule of payments. The defendant provides money to the third party in order for them to buy an annuity for the plaintiff.
• The annuity is purchased from a life insurance company and now once this is finished this can not be changed. An additional single amount is set aside to cover fees and various expenses
• This annuity settlement begins on its payment schedule. This entity does earn interest. There is the option at any point for the plaintiff to sell off the settlement should they chose to.

Advantages of Structured Settlements

While, yes, a lump sum payment will allow access to the entire amount of money owed at once there are a large number of benefits that come when a structured settlement is chosen.

Generally, they are the better choice of the two when dealing with larger amounts of payouts as well.

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Before the more detailed technical aspects are reviewed the first benefit for many is how the settlements are paid out. Rather than receiving all of the money at once, the payout over time ensures there will be no here one day gone the next.

• Income gained from a structured settlement does not have any impact on eligibility for Medicaid, Social Security Aid or other forms of aid on the government level
• If you should pass away before the term of the settlement is paid out you are able to designate in the contract an heir to be paid the rest of the agreement.
• These funds remain untouched by changes in the financial market (can not be said for items like stocks or mutual funds)

Selling My Structured Settlement

While a structured settlement is, by design, established to pay out over an extended period of time, there are options should an individual’s situation change.

Companies will buy out your annuity settlement and your structured settlement but it isn’t just that simple.

The financial impact is a tricky one and not as clear as someone without proper advising would like. A pressing need for immediate cash flow might make this payout seem enticing but in the end, make it cost more than you know

Either Way, The Money is Yours

Each type of settlement has its pros and cons and its place. Knowing how structured settlements work and what the benefits of them you can more easily make your decision.

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