When a civil suit has been settled, the defendant complies with paying the plaintiff a certain amount of money to resolve the lawsuit. Often, the defendant will make their payment in a lump sum. However, sometimes the plaintiff may wish to receive this money in smaller installments over an extended period. Should they change their mind later on, the plaintiff can look for companies that buy structured settlements for larger lump sums in which case the court would have to approve the transaction.
Structured settlements can be advantageous, but they don’t apply to everyone’s circumstances. For instance, it is more sensible to take a lump sum payment if your financial situation drastically deteriorates. Still, a structured settlement option is the best, especially if your compensation is a significant amount. Here are some of its benefits.
1. Cost of living adjustments
The first advantage of structured settlements is that they can be tailored to the cost-of-living fluctuations. Depending on the design, it can be adjusted to change to meet your daily needs and requirements better.
2. Low taxes
Most elements of structured settlements are non-taxable, with a few exceptions. For instance, money that is a settlement for only emotional distress that does not stem from physical injury or sickness is taxable. However, all the physical personal injury settlement payments are non-taxable. When you choose to put your compensation money into the structured settlement, you will also be able to avoid paying a high tax amount on your entire payment at once.
3. Helps with money management
The structured settlement can act as an inbuilt money management mechanism, which will help protect you, the plaintiff, from making bad investments, thus losing your funds needlessly. They work as a monthly supplemental income because the pre-set amounts are paid over a pre-determined period.
This helps to protect you from spending your money too fast and from making poor investments. It also saves you from several other commonly made financial mistakes. Usually, plaintiffs that choose to make lump-sum payments spend their settlement in 5 years or less. With a structured settlement, you are cushioned against this.
4. Safety from outsiders
If a plaintiff goes through a divorce with their spouse, the funds they still have in their structured settlement are not accessible to their ex-spouse. Your creditors also don’t have access to the plaintiff’s structured settlement, which therefore makes it safe from outside parties.
5. Offers market safety
The funds in your structured settlement will not be affected if there are fluctuations within the market. Therefore, your payments won’t deplete at a rapid rate. On the other hand, they will not increase due to a flourish in the market either.
6. They are customizable
These settlements are highly customizable to each plaintiff’s needs. Occasional lump-sum amounts, the payment frequency and quantity, and the period for payments are all interchangeable. They are customized to meet and serve your needs, and the process is undertaken with your best interests at heart.
Structural settlements have several benefits for plaintiffs. They are created to ensure your financial well-being. Before you make any decision, get the opinion of a financial professional