A structured settlement, which offers injury victims cash
payments through a long-term annuity as compensation for their
damages and medical expenses, offer a number of possible
advantages over payment in a lump sum. While the lump sum
payment is the traditional way for responsible parties to pay
accident claims, the structured settlement offers payments over
the span of an agreed-upon period of time. This length of time
may span from several years up to the remainder of the life of
the injured party, depending on the severity of the accident,
the amount of money involved, and the agreement reached between
the two parties.
Depending on the specific circumstances
of the case, structured settlements can have numerous advantages
over a lump-sum payment:
They are tax free. Thanks
to a 1982 change in the Federal tax code, payments on a
structured settlement are free of state and Federal taxes. The
paying party funds the settlement through the purchase of an
annuity which earns the interest to fund the continued payments.
This is not the case with a lump-sum payment, which the injured
party must invest themselves. Any interest earned on those
investments are taxable.
They are potentially
safer. Most people who come into a large sum of money suddenly
find that they are quite popular with long-lost relatives,
unscrupulous purveyors of investment schemes, and good,
old-fashioned thieves. By receiving payments in substantially
smaller amounts, the beneficiaries of a structured settlement
have far fewer worries about having others take advantage of
them, which could leave them both poor and without adequate
medical care.
They are simply less trouble.
It's difficult enough to adjust to changes in your life if you
are seriously injured without having to also take the new
responsibility of investing and managing a large sum of money.
Not only must you invest the money, but you must invest it
wisely, knowing that it must continue to fund your living and/or
health care expenses. The regular payments of a structured
settlement, along with their tax-free status, simplify day to
day living considerably.
While they are not ideal
for everyone, particularly those who are experienced investors
or those who need a large sum of money at once for immediate
medical expenses or the purchase of a home, structured
settlements can offer a simpler, safer payment solution for many
people who are victims of an accident or injury.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
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Author: Charles Essmeier