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Pros and Cons of A Structured Settlement

Do you know the pros and cons of a structured settlement? If you have been awarded one by a judge, then you might be thinking over all of these things already. Maybe your attorney helped explain it to you. But if you are still wondering about the benefits and disadvantages of a structured settlement, we have some information that might help you.

Pros

One great benefit of a structured settlement is tax avoidance. There are legal ways to have it set up so that you pay little or even no taxes on your structured settlement payments. Taxes on lottery winnings, annuities and personal injury settlements can sometimes be very high so these tax breaks are truly beneficial.

Structured payments are a great way to protect yourself so that you don’t spend the money all at once and you learn to be responsible with it. This is why they are typically issued to someone to people under 18 and plaintiffs whose main source of income or only source of income is going to be the annuity payments.

Cons

The most obvious con of a structured settlement is that you don’t get all of your money up-front. You might want to purchase a home or new car, pay for college for you or your children or something else with the money and you can’t do that when you don’t have all the cash. However, there are ways around this as well since you can show proof to lenders that will have those structured payments coming in.

If you consider selling your structured settlement, you may find a better result although you will lose part of your money in the process. This may or may not be available for you individual case.

Some people such as savvy investors do have the ability to take the lump sum payments and invest it their own way to end up with more money later. Unfortunately, structured settlements do not allow them to do that so this would be another con.

When you receive or know you will be receiving a structured settlement, your best bet is to weigh the pros and cons and talk with your attorney and try to work out the best deal to meet your needs with the other parties involved. This way, you do not face difficulties in the future. There are different options such as a lump sum payment every 2 or 5 years instead of monthly or annual installations. This might be a better option for you.