Prior to the advent of annuity settlements as a type of settlement payments, defendants were often actually burdened by the fact that they had to accept the lump sum amount of their compensation all at once. Even when the defendant is a large company, extracting large sums of money from their funds to satisfy the settlement was definitely not a favorable business practice. The same holds true for the plaintiff, who is suddenly burdened by having to come up with an effective and properly managed plan for their finances.
There are also many instances of a plaintiff or plaintiffs squandering their settlements. Spending sprees and poor judgment have caused many recipients of cash settlements to end up in poor financial situations. Hence, the structured settlement was a good option to overcome the drawbacks off a one-time cash payment.
The advantages associated with payments over time definitely outweigh the disadvantages, and it is very commonplace for many cases involving loss or injury to be resolved by the implementation of a structured settlement. In most cases, when the plaintiff does request a lump sum settlement, they are required to prove to the court that they have reasonable and important major expenses. The type of expense most often quoted are associated with career moves, high medical expenses and also costs of education for children.
These safeguards subsequently make a structured settlement beneficial to both parties, defendant and plaintiff. Of course, you may also opt to sell your structured settlement. You are entitled to, at any given time; sell the settlement to convert it into lump sum, but you might not be able to convert the lump sum into structured payments as easily.
As previously mentioned structured settlements are favorable to all parties involved in the dispute or case. The plaintiff will realize several distinct advantages with the acceptance of a structured settlement as opposed to a lump sum arrangement. As far as the defendant is concerned; it is always easier to pay compensation in regular installments than to be forced to pay all at once, especially if the amount is significantly large. The payment plan option also decreases the legal and administrative expenses that the defendant has to pay. This type of agreement is always more appealing to the court also because the time spent on a trial is minimized.
The bottom line is simple, compared to a one-time large cash payout; a structured settlement is a good user-friendly solution for everyone involved. That being said, there are still some situations where a lump sum payout is the better course of action.