What Circumstances Are Best Suited For Structured Settlements ?

The following is a guest post. Enjoy!

When you have been awarded the ruling in a case such as one where you have been injured personally in a car accident or in any accident or you have just been awarded compensation in a case of workman’s compensation claim or a negligent death case you would in all probability receive your money in the form of an annuity. This annuity will pay you your claim in the form of periodic payments and is known as structured settlements. These forms of annuity are superb for people whose financial needs are met by the periodic payments received from structured settlement. And the fact that you get the advantage of not paying tax on the amount received from these annuities makes up for the icing on the cake. Structured settlement is without any doubt the best form of claiming huge amounts of money to be received in the form of settlements in many a case.

The reason why structured settlement came into picture

It was witnessed by the lawmakers of the country that the plaintiffs who won any compensation for damages from defendants did not possess any financial management skill to manage the large chunk of lump sum amount received by them in the form of settlement of a case. Thus, even though this money would suffice enough to pay for the medical expenses and provide for living expenses, a large portion of it would be utilized in a manner that does not actually improve the plaintiff’s condition.

Keeping this factor in mind The Congress in 1982, passed The Periodic payment Settlement Act which encouraged payment of compensation in personal injury cases or cases related to workmen compensation claim or wrongful death in the form of structured settlement. It was also put forth that the compensation would be paid not as a lump sum amount but in installments over a period so that the plaintiff can enjoy a hearty interest on the same. Moreover, the Government made the amount receivable free from tax, thus, adding to the benefits of structured settlements.

The great advantages of structured settlements

A structured settlement is nothing but an annuity which is made use of to pay compensation to plaintiffs by the defendants. There are many advantages of such structured settlements, some of which are highlighted as below:

  • Tax Free: One of the most important advantages of structured settlements is that the interest which accrues on them or if any capital gain arises on sale of such annuity, then the amount is absolutely free from any federal tax or local income tax or state tax. This implies that the saving in a structured settlement will be much more than in any other investment of the same nature.
  • Not affected by bull or bear phase of economy: A great thing about structured settlements is that they are not at all affected by the rise or fall in economy. Whether the financial market is in a bearish phase or in a bullish phase, the structured settlement will continue to pay you interest at the same rate and will not be affected by it.
  • Beneficial even after death: In case of death of the plaintiff, the beneficiaries of the recipient may continue to receive such tax free payments from the insurance company.
  • The payments can be made to begin immediately or may be deferred as per the will of the investor. The payments can be made to be scheduled for any length of time as desired by the investor.

The cases where structured settlement is ideal form of legal settlement

Structured settlements are ideal in a number of cases such as personal injury case, worker compensation claim and wrongful death cases. It is seen that in maximum number of such cases, structured settlement is received by people in the form of legal settlement. These are the main reasons why structured settlements are ideal for these cases:

  • Wrongful death: In case of wrongful death, structured settlements help the family of the deceased. If the plaintiffs i.e. the family of the person who is made to be the subject in case of a wrongful death claim wins the case then the legal settlement received in the form of structured settlement would help to aid the family financially and support them in time of need. Since the amount is received over a period of time, the family has a fixed source of income in this form.
  • Workmen’s Compensation Claim: When any workmen get injured while being on work, they receive compensation from the employer. It must however be proved by the workman that the injury has taken place in due course of employment and if this condition is fulfilled then he is paid compensation in the form of structured settlements. This helps the worker in meeting his medical expenses and supporting his family while he gets fit again to work. The amount received in periodic amounts with tax free interest supports the worker and his family as a substitute to the salary being received by the worker.
  • Personal injury: In case of a personal injury case, when the plaintiff wins a award then it should be paid in the form of a structured settlement since it is paid on an annual basis or monthly basis and helps the plaintiff to meet his medical costs as well as legal costs.

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