Let’s say you are driving down the road and out of now where you are rear ended by a coca-cola truck. It is determined that there was an abnormal amount of negligence on the part of the driver. As a result Coca-Cola agrees to pay you money to pay for damages to your car, your bodily injuries and anything else as determined by a series of judges, lawyers, and/or financial planners. The proposal is that they pay you in either installments or in a lump sum; if you agree to installments they set up what is called a ‘structured settlement.’ Most of the time these future payments are funded by a series of annuities purchased to guarantee the future payments. Another very popular settlement is the workmans compensation settlements claims.
These future payments are arranged to pay out in whatever way best suits the one receiving them, this person is often called the plaintiff. For example when my father was awarded a pain and suffering settlement for mal-practice he set the funds up in a structured settlement for my sister and I. We each received a portion of the annuity on our 18th, 19th, 20th and 21st birthday – then on our 25th birthdays we received a final lump sum. That just happened to be how our father set up the payment schedule.
Among the primary benefits in a structured settlement is the tax advantage it provides as the payouts cannot be taxed in most cases; and can have tax deferments available to the plaintiff that wouldn’t normally be available. A structured settlement can assist the individual receiving them by preventing funds from being prematurely used. The settlement actually prevents the one receiving it from themselves by making sure the funds come incrementally. This is especially true for minors who may be receiving an inheritance. Because the maturity is not there in many minors the structure allows them to grow and mature within the reception of the funds. It can be very helpful to have a certified structured settlement consultant helping you make these kinds of decisions.
In some situations a disabled plaintiff may be better served receiving payments over time or in a special needs trust in order to facilitate the purchase of medical expenses that may arise in the future as a result of the injury. This way one is protected against spending all the money in the first few years only to find out later on that you need follow-up medical care.
Whatever the case may be a structured settlement is designed to disperse a large sum of money over a period of time to a specified individual often times settlement cash structured for flow is used to help pay bills and cover expenses.
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