The Benefits of Structured Settlements

Before getting into the benefits of structured settlements, it might be a good idea to explain what it is. A structured settlement, sometimes referred to as a periodic payment judgment, occurs as a result of a lawsuit where there is a considerable sum of money to be paid out. Usually the amount is broken down into payments and put on a schedule to be paid out over time. Payments can be made monthly, yearly, or every couple of years, depending on the agreement. The payments can extend over a period of many years. A person receiving the payments is referred to as the payee or annuitant.

So What's Good About Them?

Structured Settlements

Settlement Payments are tax free. This goes for the State level as well as the Federal level. The income received from this type of agreement is not considered annual gross income and is therefore not taxable.

Structured settlements mean more security. Regularly scheduled payments over a specified period of time adds security for a lot of people; especially for senior citizens living on a fixed income. It is less likely for them to be taken advantage of if they only have smaller amounts of cash as opposed to keeping large amounts on hand. They also offer security for children seeking a college education. For example, a settlement can be set up that will pay for college tuition. This settles the question of how they will pay for their schooling. Another way structured settlements add security is from the fact that most insurance companies that make these payments are some of the largest with the best reputations in the country.

Structured settlements take the worry out of your financial future. They add to the security of knowing that you will have some form of income in the future. Lump sum payments are taxable. In addition, it's possible to misuse a large sum of money - but not as much with smaller payments. This is particularly beneficial if there are living expenses as well as medical expenses that need to be met with these funds. Also, payments can be arranged to last the lifetime of the recipient.

Settlement payments do not affect Social Security benefits. As a result, the money an individual will receive from Social Security will be more per payment - which will help those on a fixed income. They also cannot be touched in divorce proceedings. Creditors cannot claim this money in payment of debts.

Structured settlement payments are cheaper. A settlement may eliminate lengthy court proceedings. The parties may opt to settle the case and never step foot inside a courtroom - which can be rather costly.

Ultimately, settlements that pay out over time can be very helpful in certain situations. For instance, individuals incapacitated whether temporarily or permanently, those that lack financial investment savvy, people that will require ongoing medical treatment or rehabilitation, minors.

I am not a legal expert, nor am I licensed to buy or sell a structured settlement. For more information on creating structured settlements and a counterpoint to selling them, see John Darer website.

The Benefits of Structured Settlements