If you ever bring up a claim against someone or some company claiming that they are at fault for causing you harm, then you would be wise to learn about and understand what structured settlements are.
Usually, if you were to win a lawsuit or settle a lawsuit, then the defendant is responsible for paying you the amount that was decided upon in court in one lump sum. So just pretend for a second, that you were exposed to asbestos and then developed cancer due to the exposure. You then proceed to sue the manufacturer who made the asbestos. The company decides to settle out of court for $1 million, so you get a single check for that amount.
A lump sum payment is only one option for how you can be paid though. With structured settlements however, you can be paid over time with instalment payments. It all depends on your circumstances as to which one you should go with. If you go with the instalments plan, the payments can be setup any number of different ways, depending on what you need. Doing this also helps protect you against inflation, something that you could be faced with if you go with the single payment.
With structured settlements, they can vary anywhere from single payment each year to a more complex system that might consist of a lump sum to start with, then monthly payments, with special rules in regards to providing you with care down the road. Usually the company or person on the receiving end of your lawsuit, the defendant, would buy what is called an annuity from an insurance company for whatever dollar amount. This would be bought and paid for up front and in full. The terms of the settlement will specify how often payments are made and for how much.
Structured settlements do have some advantages when compared with a single lump sum payment. One of the main reasons is you will be guaranteed to have an income source for the rest of your life. Another advantage deals with managing taxes. The amount of taxes you will have to pay on the smaller payments will be significantly less than the amount of taxes you would have to pay on a larger lump sum. Another option would be to go with a structured settlement factoring transaction. This allows you to sell off any or all of your future payments for a lump sum payment at any time.
