Structured Settlement - Definitions, Do's and Don'ts

Structured Settlements

What is a Structured Settlement? A Structured Settlement is a Settlement in which you receive "Structured" payments on a regular basis. In other words, it is a payment plan, in which, instead of getting a large lump sum, you receive smaller payments in increments. These increments go on weekly, monthly or yearly cycles. These settlements are often known as a win-win situation because the payer needs to come up with a lot less money up-front and the payee has a steady stream of income coming in at all times. This process can also be described as Annuity.

When are structured settlements used? Structured Settlements are often, but not limited to, these common situations:

1. Lottery Winnings - Often times, in the Lottery, you can opt to receive numerous smaller payments in exchange for a single larger payment. 2. Malpractice Cases - In situations where a family member is lost or left crippled due to medical malpractice, the party may be entitled to a structured settlement over the span of the victim's life or as a grievance payment. These payments don't fix things, however, they are meant to make living a little bit easier for the victims and families. 3. Insurance Cases - In many insurance cases, this form of settlement is used. This is because it is easier to make smaller payments over a longer period of time as well as the damage left behind may be better dealt with over time.

Understanding these concepts are important in the process of properly handling your income. It is important also to understand how money works over periods of time. Over long periods of time the value of the dollar is likely to decrease. This means if one was to receive, for example, $1000 a month for 20 years, that $1000 dollars could only be worth $500 at the end of the term. This is one reason some people decide to sell their structured settlement for a large lump sum.

One people decide to sell their structured settlement there are numerous reasons behind it. The first reason may be that, due to their immediate needs, they need a larger amount of money right away. A good example of this would be when buying a new car or home. Another reason people decide to sell is because they would like to invest it into something that gains equity over time and actually grows in value rather than decreases. Some people want to fight the cost of inflation and take the monthly payments and re-invest. This is the wiser choice of the two most of the time.

When selling your structured settlement or selling Annuity, it is almost always advised that you do your homework first. Don't sell to the highest bidder right off the bat. Before hand you should read up on what your options are. Seek the help of a broker, a financial advisor and a legal professional first. By doing this, you can protect yourself from scam artist to defend yourself from transactions lacking in integrity. It is always smarter to take the safest route possible. Selling Annuity can be dangerous so it is always wise to make slow and steady steps.

Strategies for Handling a Structured Settlement Cash Award

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A structured settlement involves cash payments on a regular schedule from one party to another as a result of a legal judgment or binding arbitration (or even a simple agreement between the two parties to avoid a legal confrontation). For many recipients, the lure of a big lump sum of structured settlement cash in their hands right away is overwhelming.

Enter structured settlement cash companies. They offer to buy structured settlements in return for one big payout to the recipient of the settlement. They make their money, of course, by offering only a percentage of the total settlement amount in return for giving the recipient a bundle of cash at one time. This happens all the time, although some critics believe it is borderline illegal, or at the very least distasteful.

If you're in this situation and you decide to pursue a lump sum alternative, do your homework! Investigate the structured settlement cash company's history thoroughly. Check with the Better Business Bureau, search the Internet, and by all means, hire a competent attorney. There are some tricky legal issues at play in these cases, and you don't want to have problems later on with the law or the structured settlement cash broker with whom you've made these arrangements.

It's smart to take some time after you learn that you'll be getting structured settlement cash to get over the emotional high and return to more rational thinking. There is much to recommend keeping the structured settlement as is - that is, taking regular payments over time instead of selling the settlement for fast cash. One advantage is the tax shelter an annuity provides. You can set it up, with the help of a skilled attorney, so that it provides you with payments that are tax-free.

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However, often there are high fees associated with the management of an annuity. While the fees seldom come close to equalling the tax advantages, some people simply prefer a large lump sum in hand. Reasons include wanting to make a big purchase they've been putting off, such as a new home, or to pay down delinquent taxes or medical bills.

If you choose to sell your structured settlement cash award for a lump sum payout, it's vitally important to hire a lawyer. Don't let the $ signs in your eyes overrule the reasoning part of your brain. Slick companies have been known to settle with some folks for as little as one-third of the total amount of the structured settlement cash award! Those companies rely on a significant number of people who jump before thinking it through. This is why an attorney is so crucial. He or she can help keep you in the right frame of mind.

Other reasons to enlist the aid of a trained structured cash settlement lawyer include dealing with certain legal restrictions, tax implications, and related obstacles. It varies from state to state, so be careful. Whatever you decide to do with your structured settlement cash, arming yourself with the correct information for your situation is the key.

Now that you've learned something about structured settlement cash award, maybe you want more information or need greater detail about certain specific issues. Please visit Structured Settlement Tips for more information.

Ideally, you will leave this article with an enriched perspective on the topic of structured settlement cash award. The facts and analysis presented here were written with a single goal: to help you the reader to learn more about this fascinating topic.

Ken Austin is the webmaster at Structured Settlement Tips and Structured Settlements and Annuities.

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