A Short Guide to Structured Settlements

Annuity selling

You’ve probably heard of structured settlements, but unless you’ve been involved in a personal injury case you probably haven’t bothered to find out anything more about them. Structured settlements are usually used to resolve personal injury cases. Since compensatory damages are usually large amounts, they are generally funneled to the recipient through an annuity for the tax shelter. There are typically two choices that a person has when it comes to getting the structured settlement cash — in a lump sum or annuity.

What’s the difference?
The difference between these two is pretty self explanatory. One option is a lump sum and the other isn’t. The tricky part is the annuity. People get confused about annuities because there are so many different types of them, but when it comes down to it it just means that the person getting the funds will receive periodic incremental payments over a period of time.

Which one is right for me?
Which of these options is right for you really depends on a lot of things, but two are the most important. One is the amount of expenses you have at the time of the settlement. Maybe you have a stack of medical bills waiting to be paid or you’re about to send your kid off to college — in these cases you’ll probably want the lump sum. The other is whether or not you have any other sources of income at the time of the settlement and in the future. If you don’t, the annuity might be a better choice and easier to manage.

Do I have any other options?
You do. If you’ve heard of structured settlements, you’ve probably also heard that there are companies out there that basically buy them. This is one of the only ways to get a structured settlement cash out since once the terms of the settlement are made they’re pretty much set in stone.

Do you have any questions about structured settlement lump sum or annuity payments? Feel free to ask us in the comments section below. To see more, read this. Good references.

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