Oftentimes, whenever a case is settled for a large sum of money, a financial planner, the plaintiff’s lawyer or the defendant would propose to pay the settlement through installment. Rather than paying the price in one lump sum, a structured settlement distributes the payment to smaller amounts that need to be completed in a specific amount of time.
This would give a lot of advantages to both parties, and is easily the payment method that is chosen by defendants. There are different ways for you to pay a settlement. It can be completed within a number of years, or in sums that are paid in intervals of a few years.
An important advantage of a structured settlement is that the avoidance of tax. When you are able to set up the settlement, the plaintiff would have less tax responsibilities. In a few number of cases, the settlement would also be tax-free.
Moreover, a structured settlement can give a plaintiff some protection from having their funds dissipates when they are required for future use. For minors, a settlement can serve as a source of funds for college and other needs. Also, people who are injured would get a lot of benefits from a settlement, especially if they would not be able to function well because of nursing an injury.
On the other hand, there are also some disadvantages to structured settlements. Some people who are involved in such an arrangement may be trapped by the required payments that have to be made. For instance, a house or car purchase would have to wait and dependent on future payments that would be under settlement.
For some people, receiving a lump sum that totals the whole amount of the settlement is more advantageous than receiving it as installment. This is because a lot of investments have a lot of returns for large amounts of money.
If you receive structured settlement, you may receive offers from companies which are interested in buying your settlement. This can be done by giving you a lump sum in exchange for your settlement. Of course, the sum would be less than the settlement that you would get.