Benefits of a Structured Settlement
Structured settlements are what an individual or company pays you in return of the injury or loss that they've had to suffer. It's the amount of money that the defendant pays to the plaintiff in order to dismiss their complaints and withdraw the case from the court. For receiving the settlements you've got to be at a winning position first! Once you've nailed the deal, the next step is to plan your investments. Yes, this is the best part about receiving structured settlements in periodic installments - you can invest your earnings accordingly.
Plaintiff’s best interests
The concept of structured settlements rests on the idea that it becomes difficult to manage a lump sum amount and the plaintiffs end up spending the entire amount sooner than expected. It was observed that many people faced issues in supporting medical treatments and other expenses after they received a lump sum. This was the scenario before the Periodic Payment Settlement Act of 1982 came into being (passed by the U.S. Congress). It was after this act was passed that structured settlements were introduced to make it easier for the plaintiff to manage such a huge amount of money. It was done to ensure that the plaintiffs have a secure source of income for their regular treatment expenses.
What makes structured settlements extremely attractive is the fact that you are paid according to the pre tax value of the annuity. This means that a major chunk of your earnings are saved from being chopped off! In terms of beneficial features of receiving annuities as a part of a structured settlement claim, being free of tax cuts is definitely one of the most important advantages. In some cases, if settled appropriately, the plaintiff has the least tax obligations, if not completely tax free.
In some cases, it may so happen that you are really in need of regular payments to support your treatment or damages which may have occurred. In such a situation the installments are more beneficial than a lump sum amount. You are at a position to receive payments in parts which will ensure that you have a steady source of income, especially to take care of your fixed expenditures. For instance, someone who is injured will need the payments to support their healthcare expenses.
You need to keep your earnings and finances secure and intact, protect it - do you against whom? Yourself! Don't be surprised - it's a fact. With so much money in hand it definitely becomes difficult to control the urge to spend it. When the amount is safe with the insurance company who has been given the responsibility to pay the annuities to you, it gives you less scope to spend mindlessly. You may even be surrounded by a swarm of so called friends and relatives who are hoping to get a share of the small fortune that you've come by. Structured settlements save your money from all these factors.
In case the plaintiff receives the structured settlements when they were legally minors or on behalf of a minor, the future becomes secure as the annuities would then pay for education and other expenses. It's like a fixed deposit with a twist - period payments (quarterly or monthly, according to the terms of agreement with the defendant). At times the payments can also be timed according to the requirements of the plaintiffs who may ask for more than one annuity during their adulthood.
In case of structured settlements you have the option to choose a suitable payment structure or scheme which will suit your requirements in the best possible manner. For instance, disabled people can opt for a special needs trust where the money will be kept and be paid out at regular intervals or as and when required. They can also employ a financial consultant or planner who will get such things sorted out without any complications.
In all, structured settlements are way better than cash outs or lump sum payments or loans against the structures. There can be absolutely no alternative to receiving periodic payments, when the needs aren't immediate. Moreover, these annuities are tax free more often than not and they guarantee a steady source of income for a number of years at a stretch - amounting to a safe and secure future. When you sell it off, you lose on a part of the settlement (discount to the factoring company who is buying the structures), which is not desirable at all.