You are likely to become a recipient of a structured settlement if you win a lawsuit for any injury or sickness inflicted upon you by another person intentionally or account of negligence. These damages are paid on a periodical basis. Now, often people are attracted by the fact that they can receive the entire amount immediately if they were to sell structured settlement. It is very important that you weigh the pros and cons of this decision before actually going for it.
Structured settlement companies today have become a very popular way of paying for damages. For one, it makes it easy for the defendant to pay gradually and thus lightens his or her burden. Second, the claimant is also assured of a fixed regular income. The assurance exists because the defendant does not pay the claimant directly; instead the payments are routed through an insurance company with whom the defendant buys an annuity.
Now as tempting as it may be to sell structured settlement and cash in on the entire compensation in one go, you must remember that ultimately you are losing out on some of the money. This happens because structured payments are tax free but when you take an entire lump sum you become eligible for certain taxes. Secondly, the companies that will buy your structured settlement are doing so to make a profit; hence it is obvious that they will buy at a discounted price. This will result in significant reduction in your total compensation.
However, there are situations in which structured settlement companies can be a hindrance. For example, if the claimant has a lot of pending medical bills or is facing a financial crisis etc. then the large amount may provide a permanent solution. The claimant’s business may need some financial boost which can be beneficial in the long run. If there is a debt that can absolutely paid form the settlement amount then it makes sense to take a lump sum. In cases where the debt will only be partially paid then it makes more sense to invest the periodical payments such that the return on the investments can be utilized for paying the debt.
If you are very confused with your decision then you can contact the National Foundation for Credit Counseling that will advise you on how to handle your situation and whether your decision to sell structured settlement is wise or not.
If the claimant has no immediate need for the large amount, then he or she stands to benefit more in the long run by opting for periodical payments instead of deciding to sell structured settlement. Some settlements will have provision of paying to kin in the event of claimant’s death but if such a clause does not exist in your agreement and you are worried about your family’s financial future; then you can opt to sell structured settlement and make a sound investment in their name.
If there is no financial emergency then it is prudent to opt for structured settlement companies. Human beings have a tendency to spend more if they get more; so if you don’t opt to sell then your money will be safe and keep coming to on a regular basis.