Injured individuals have options for receiving their settlement money. Some choose to receive it all in one payment, known as a lump sum payment. Others choose to receive it in smaller amounts periodically. This is called a structured settlement.
In a personal injury case, if someone is physically injured, they may need expensive, ongoing medical treatment. To cover these on-going expenses, many opt for structured settlement plans. Structured settlements offer recipients a series of periodic payments over an extended period to ensure those injured have long-term financial stability and security.
While structured settlement plans offer several advantages, they also come with certain drawbacks. In this blog, we’ll share the pros and cons of structured settlements.
How Do Structured Settlements Work?
Structured settlements have become an increasingly popular option for injured plaintiffs seeking financial compensation. Rather than receiving a one-time lump sum payment, recipients would receive regular payments over a predetermined period. These payments can be tailored to meet the individual's needs. They can cover expenses such as medical bills, replacing lost income, or funding long-term care.
Decide if a structured settlement plan is right for your personal injury case by weighing the advantages and disadvantages.
Pros & Cons of Structured Settlements
Structured Settlement Benefits
Guaranteed, Steady Stream of Income: One of the most notable benefits is the assurance of a steady stream of compensation over time. This provides financial security and stability for those trying to navigate their future after settlement.
Customized payment schedule: Injured individuals are provided with customized and predictable payment schedules to fit the specific needs. This helps injured plaintiffs effectively plan their finances, tailored to meeting financial needs now and in the future.
Tax Benefits: Structured settlement payments for personal physical injury cases are usually tax-free. This provides the recipient with significant tax savings!
Peace of Mind: For Injured Plaintiffs, the aftermath of an injury and legal settlement can be overwhelming, both financially and emotionally. Structured Settlements ensure plaintiffs' have the peace of mind before, during and after the settlement process.
Structured Settlement Cons
While structured settlements offer injured plaintiff’s predictable income for the future, this payment option isn’t for everyone.
Limited Access to Funds: Structured settlements do provide a steady stream of income, but do not allow recipients to have access to it outside of the agreed upon benefit dates and amounts. This means that unlike a single lump sum payment of the settlement, a recipient can only have access to the amount agreed upon at a given time.
Less Flexibility in Adjusting Payments: While structured settlements offer customization in scheduling payments, they cannot adjust the amount of funds after the settlement is finalized. This may cause complications if there is a sudden change of financial needs or external circumstances.
Limited Investment Opportunities: compared to single lump sum settlements that can be “invested” for growth potential, structured settlements usually (but not always) come with a fixed rate of return. Recently, there have been new products that provide opportunities to participate in market based performance returns.
A structured settlement annuity offers plaintiffs a more scheduled and safe option to receiving settlement funds, yet they come with restrictions and boundaries. If you are injured and planning for settlement, it is essential to weigh these pros and cons to determine what compensation method best aligns with your current and future needs. In most cases, the best settlement design is a combination of cash at settlement and a future benefit schedule to meet future needs. Its best to make this decision after consulting with an experienced personal injury attorney and settlement planner who will offer guidance in your decision making process.
Structured Settlement Planning with ELANA Financial
At ELANA Financial, we specialize in designing meticulous structured settlement plans, product resources, and administration services that help foster peace of mind and effective long-term planning for injured plaintiffs and recipients of personal and non-personal injury settlements.
Book a Consultation with ELANA Financial and Settlement Architects today! Our team of experienced financial advisors are here to provide you with expert litigation support services and the guidance and support necessary when planning for settlement.
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