Structured Settlements Versus Lump Sum Payments

Structured Settlements Versus Lump Sum PaymentsIf you’re involved in an injury lawsuit or some other type of litigation, the topic of whether or not you would like the damages paid out in a lump sum or as a structured settlement has likely been raised. Each payout method has its ups and downs, with structured settlements offering long term guaranteed payouts and a lump sum offering the ability to invest or otherwise use the money immediately. Let’s explore these two types of settlements and how they compare.

Defining Structured and Lump Sum Settlements

A structured settlement essentially means that the total amount of a legal award is split up in to a number of annual payments which commence at a certain point. For example, a judge awards an injured party $500,000 which is placed into a structured settlement and paid out at $25,000 per year for the next 20 years.

A lump sum payment is exactly how it sounds – you receive your settlement ($500,000 in this case) paid out in a single check which you can then do with as you please.

Pros and Cons of Structured Settlements

As with any financial investment or decision, there are some pros and cons involved with structured settlement. On the plus side, the types of settlements provide a guaranteed payout over a longer term, typically have a lower tax burden (more on that below) and can be set up to be passed off to children or family members in the event of a death.

The cons of a structured settlement mostly center on not having the freedom to spend your settlement money as you see fit. This can be very irritating to individuals who have large medical bills or a pre-existing debt burden that they would like to pay off.

Pay Careful Attention to Tax Issues with Lump Sum Payments

While taking a lump sum for a legal settlement might seem like a good idea, there can be a huge tax burden involved with doing so. The IRS will come after a chunk of any lump sum payout, regardless of whether it was for injuries, damages or legal costs, whereas they tend to take a lot less of a structured settlement. Speak with an accountant or your financial advisor for more information around this, but know that a structured settlement may offer a lower total tax bill.

Making the Final Decision

This one is up to you, dear reader! You will have to take the information you’ve gathered to sit down and make your own decision as to whether you want a structured settlement or you want to receive your money in a lump sum to do as you please. At the end of the day it’s your call – so choose wisely!

If you have a structured settlement that you would like to turn into a lump sum of cash, Rapid Cash Funding can help. Give our team a call at 1-877-63-RAPID or fill out the quick form at the top right hand side of this page. We will share how you can free up the cash in your structured settlement or annuity quickly, so you can get to enjoying your money the way you should be. online spilleautomater

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