Sometimes in life, events happen that leave us with the opportunity to come into money, sometimes a large amount of money. There may be a car accident that leaves you injured and the other party knows that they are at fault. You could also have been the victim of some sort of malpractice suit with a business. In most of these cases, the defending party will choose to settle out of court. Whatever the case, there are many different options to the way that you receive this money. One of the smartest ways to receive the money is through a structured settlement.
What is a structured settlement?
A structured settlement is the legal term used for a money settlement that is broken down into smaller payments instead of being paid out all at once in a large lump sum payment. While some people may prefer receiving their payment as one lump sum because there are medical bills or other issues related to the injury or condition that may require the money, there are other reasons why having a structured settlement can be beneficial in this situation.
Why should I use a structured settlement?
- Lower court time
◦ For most cases, if you decide not to make a settlement, the hearings can take a long time, sometimes even years. This not only ties up your time because you are required to be present at the proceedings, but it also will end up costing you a lot of money with lawyer and court fees in the long run. It is wisest for both parties to come to an agreement.
- You are less likely to blow your money in one place
◦ Some people love the idea of receiving this large amount of money that can be used to do things like paying off credit cards or student loan debt. While these plans might come into action, many times you will receive the lump sum of money and then months down the road, come to realize that you never fully spent that money on everything that you had intended.
- Tax Benefits
◦ Large sums of money that are made during the year, whether they are from income or settlements, are highly taxed by both the federal and state governments. In most cases, if you choose to go the route of using a structured settlement, there are usually less obligations for you when tax season rolls around, and sometimes your case may even be considered tax-free!
- Money Consistently Coming In
◦ A structured settlement gives you the comfort of knowing that you are getting a certain allotted amount of money on a certain day of each month, or whatever time period you may have set for your payments to come in. This is a relief when it comes time for bills to get hectic or holidays to come where gifts need to be purchased. You will be thankful that there is this money to fall back on.
Whatever the reason is for you considering the different ways your money settlement could go, take all of these important key points into place. Don’t get caught in the heat of the moment and the excitement of taking a big sum of money all at once. Be smart about it and take your time to make the right decision.