The answer is, it depends. Your personal injury lawyer is the person best suited to determine if a structured settlement is a good idea in your particular case. They are a wonderful solution for some personal injury plaintiffs. But they don’t make much sense for others.
Before we get into the pros and cons of structured settlements and whether one is a good idea for you, let’s take a look at what they actually are.
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Structured Settlements Defined
Structured settlements are a series of tax-free payments you receive after winning your court case or settling out of court. Rather than receive your settlement amount in one lump sum, you agree to receive payments over months or years.
The idea behind a structured settlement is to provide you with a measure of financial security after your accident. The defendant agrees to put your settlement money toward an annuity. An annuity is a financial product that guarantees regular payments over a specified amount of time.
They are provided by an insurance company. You may have heard of an annuity as a retirement investment. This is the same product, only instead of you paying money into the annuity, the defendant does.
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Pros and Cons of Structured Settlements
First of all, if your settlement is going to be less than $150,000, you should just opt for the lump sum. That being said, let’s take a look at the pros and cons of structured settlements:
- They keep you from spending all of your money too fast. Structured settlements are best for large settlements, where if you get a lump sum you might be tempted to spend a whole lot of money, really fast.
- Structured settlements save plaintiffs money on taxes. While most of a personal injury settlement is not taxable, parts of it may be. According to the Internal Revenue Service (IRS), punitive damages and interest on a settlement are considered taxable income, which can add up with a lump sum but is spread out with a structured settlement.
- Structured settlements are flexible in the structure of the payments. You can arrange for the first payment to be larger than the others, allowing you to pay your legal fees and other expenses related to your case, and the following smaller payments would provide you with needed income. You can also arrange for payments to increase or decrease over time, depending on your needs.
- You don’t have immediate access to the money. With a lump sum, the money is at your fingertips in a bank account (unless you invest it.) With structured settlements, you have to wait for monthly or yearly payments.
- Unexpected bills can be a problem. Unless you keep a cushion in your bank account, unexpected bills can be a problem if you opt for a structured settlement. You generally can’t change the terms once you’ve agreed to them.
Getting Structured Settlement Funding
If your lawyer has negotiated a structured settlement for you but the first payment seems very far away and you need money now, we can help. You can apply for legal funding with a structured settlement just as you would with an expected lump sum payment.
In this situation, we don’t have to estimate a predicted settlement, so it is easier and faster to determine how much legal funding we can provide to you.
After Structured Settlement Payments Start
Sometimes, plaintiffs who receive a structured settlement find that they don’t like waiting for structured payments to trickle in. In this situation, it is possible to get structured settlement funding. High Rise Financial might purchase a portion, or all of your total settlement, and pay you one large, lump sum.
As always, we would advise you to consult with your legal counsel before making a big financial decision like this.
Need Cash? Apply for Legal Funding Today
Just fill out the form to the right to get your application started. Once we receive your submission, we’ll get in touch with your lawyer to get the information we need. In most cases, we can approve you within an hour.
Once you’ve accepted our offer of legal funding, we can transfer the money to your account within 24-48 hours. Have questions? Start an online chat or call us at (866) 407-6404.