Structured Settlements: What You Need to Know

If you get a severe injury from an accident because of another person's negligence, you deserve compensation for the costs and losses of the injury. You can seek compensation for medical expenses, loss of earning capacity, pain and suffering, or loss of enjoyment in life.

Whether an out-of-court settlement with the defendant's insurer or a trial judgment, the compensation you receive is in monetary form. However, you can choose between receiving the amount as a lump sum payment or a structured settlement.

So, what is a structured settlement, and how does it work? This article answers the questions you might have about structured settlements.

What Is a Structured Settlement?

Unlike lump sum payments, structured settlements come in periodic payments for an agreed period or over a payee's lifetime. If you choose a structured settlement, you can plan how you will receive your payments. For example, if you have a huge medical bill to settle, you can often ask for a large payment upfront to settle the bill.

Similarly, if you have lost your income, you can negotiate for smaller payments over a long period to help you pay your bills. Other factors you can negotiate about a structured settlement agreement include what the payment frequency will be and whether your heirs should continue receiving the payments if you die before depleting the funds.

Is a Structured Settlement or Lump Sum Settlement Better?

Your choice between lump sum and structured settlement depends on your needs and preferences. For example, if most of your compensation is for medical expenses, you will likely need all the money upfront to settle the bills. Also, you need a lump sum settlement if you plan to start a business or buy a property with the settlement amount.

On the other hand, if the settlement is large and you have no investment plans, a structured settlement will help you avoid spending the money too fast. In addition, structured settlements can help you reduce your tax obligations because you receive small amounts you cannot easily invest.

How Do I Determine the Best Type of Settlement for Me?

As stated above, the best settlement type depends on your circumstances. For example, if your settlement is small, structured payments will offer no benefits because the periodic payment will be too low. On the other hand, if the settlements are large amounts, a structured settlement guarantees an income over an extended period. Unlike an investment, you cannot lose your settlement money.

Ask yourself these questions to determine which settlement type suits you best:

• Do I need lifetime medical attention?
• Will I return to work after healing, or does the injury affect my ability to work?
• Do I need costly medical interventions in the future?
• Do I have the skills necessary to manage large sums of money?
• How large is my current medical bill?
• What are the tax implications for each option?

Though simple, these questions play a huge role in helping you analyze your circumstances better.

If you have a personal injury case, you can expect compensation based on the severity of the injury and its impact on your life. Use the information above to choose between a lump sum payment and structured payments once you receive your settlement. If you are still unsure which payment option suits you, seek advice from an experienced personal injury attorney.

At Frank W. Thompson Attorney At Law Erwin & Thompson LLP, we value fair verdicts for our clients more than our monetary gains from their cases. Contact us today to schedule a free consultation. We look forward to answering your questions and helping you seek rightful compensation for your injury.