In fact, this process has been included in the common law of some countries like the United States, United Kingdom, Australia, and Canada among others.  There is also a growing trend in the United States that has contributed to the popularity of structured settlement as opposed to lump sum settlements.  In this context, it is important to clarify the concept of structured settlement.

What is the Concept of Structured Settlement?

Basically, when a case settlement for a large amount of money is reached, a payment plan will be proposed.  This settlement will normally involve installments during a specific period instead of a one-time payment.  This is generally the essence of structured settlement.  Sometimes the implementation of the structured settlement can be done through the buying of annuities to guarantee future payments.

The manner of payment that can be undertaken with a structured settlement can essentially be any type that both parties agree to.  This means that it may be annual payments stretching over a period of specified years or can also be paid as a periodic lump sum in regular intervals.  This flexibility should be understood completely before attempting to complete any structured settlement agreement to ensure that it becomes advantageous to the plaintiff.

What Benefits can be Achieved by Structured Settlement?

It is understandable that going into a structured settlement agreement should present some distinct advantages to the plaintiff.  Otherwise, it would be unwise to entertain such proposition.  In this context it becomes extremely important to understand the potential advantages when entering into a structured settlement agreement.

• Tax avoidance – entering into a structured settlement provides you with a legitimate way to avoid paying taxes for the money that you receive.  This however must be setup appropriately in order to present significant reduction in your tax obligations arising from the settlement or to take advantage of the payments completely free from any tax obligations.

• Avoids funds from being dissipated – the implementation of this agreement will ensure that the money received will not run out unnecessarily because it will be received in stages.  In fact, the setup of the structured settlement is ideal for people who have problems managing their financial assets.  For younger beneficiaries, the funds can ensure that they will have adequate money to pay for their college education or similar educational expenses.

• Special needs trust – in some instances wherein the plaintiff has become severely disabled, either as a result of the case or not, a structured settlement becomes more advantageous compared to a lump sum settlement.

The benefit is that it helps to compensate for the shortcomings of public assistance and other medical assistance packages like Medicaid for example.  To maximize the potentials the services of a disabilities financial planner may be necessary.

Are there Disadvantages to a Structured Settlement?

With such advantages that are presented by a structured settlement agreement, it is important to know that there are some disadvantages to utilizing this process.  One of the distinct disadvantages when utilizing this agreement is that it may give the plaintiff the feeling of being trapped by the periodic payments.  In this context it is important to note that it is rarely allowed to borrow against any future payments arising from this agreement.

Another potential disadvantage comes for those who are adept in investing money.  Essentially, if they have the talent and knowhow, receiving a lump sum settlement and investing it will yield better results for them than just waiting for the staggered payments.  In this instance, the structured settlement agreement presents a disadvantage for the plaintiff.

Can a Structured Settlement be Sold?

One of the most valid questions that may arise when dealing with structured settlement is the possibility of selling it for instant remuneration.  There may be instances wherein companies may approach a plaintiff to signify interest in buying the structured settlement.  It would be beneficial to know however that almost two thirds of the states have already signed into law restrictions on the sale of such agreements.  This means the possibility of selling your agreement would actually depend on where you live.

One more thing that you must consider when contemplating to sell structured settlement agreements is that buyers intend to make a profit out of the purchase.  This means that the offer may be substantially lower compared to what you expect to receive from your original agreement.  It is likewise necessary to ensure that the buyer is reputable, established, and well-funded to avoid being scammed out of your payments.

How can a Plaintiff be Exploited with a Structured Settlement?

To be protected from exploitation, you must realize that there can be some potentially dangerous conditions that can allow you to be on the short end of the stick when it comes to a structured settlement agreement.  Being aware of these conditions will help you to get the highest payoff possible without being taken advantage of.

• Excessively high commissions – insurance companies can profit substantially from the annuities of the agreement, which also leads to huge commissions.

• Overstated value – there is a tendency for the defense to overstate the value of the agreement.  This means that the plaintiff may accept a lower value structured settlement with the defendant gaining major rebates from the annuity company down the line.

• Life expectancy – depending on the age, lifestyle, and health of the plaintiff, some lawyers may exploit any negative situation arising from these conditions.  This means that when agreeing to a structured settlement you must consider your potential life expectancy to make sure that you completely benefit from the payments.

Clarifying the concept of structured settlement will help you to determine if the agreement is truly advantageous to you as a plaintiff.  After all, one of the intentions of having a structured settlement is to see that justice is served.