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Why Structured Settlements are a Good Idea

It was bad enough that you suffered because of someone else’s negligence, and you’ve had to deal with the hassle of going through lawyers and courts for compensation for your losses.  After all that, the defendant now wants to pay you with a structured settlement.  Instead of getting what you’re owed right away, you’ll have to wait months or even years for the whole thing.  Why would you want that?

Structured settlements were first developed in Canada in the 1970s and have grown in popularity ever since.  Structured settlements can be used to pay various types of settlements, such as lottery winnings or personal injury lawsuit awards.  In the case of a personal injury lawsuit, the defendant purchases an annuity, usually through an insurance company.  The amount the defendant puts into the annuity is invested, and over time it makes regular payments to the plaintiff.  For the defendant, the upsides are that (1) he doesn’t have to put down the full amount of the settlement, because the seed amount will earn interest over time, and (2) he can turn it over to the insurance/annuity company and be done with it.   

For the plaintiff on the receiving end of the structured settlement, the idea of getting paid over time and not right away may be frustrating, but there are several advantages.  First, you have a reliable source of income for the next several months or years, which can be very important if your injury has left you unable to work for a living.  Second, structured settlements for personal injuries are typically tax-free, so you get to keep the full amount (caveat:  media reports indicate the IRS is stepping up its review of structured settlements to make sure the awards are legitimately tax-free.  If you’re entering into a structured settlement, consult with a tax advisor to make sure you understand if and how they’ll be taxed).  Third, by entering into a structured settlement and getting it over with, you may avoid a lengthy legal process that will cost even more time and legal fees.  Finally, because the insurance/annuity company does the investing of the funds for you, there’s no risk of you getting a huge settlement, only to invest it poorly or spend it all right away; structured settlements protect you from yourself, and maybe even from spendthrift family members who’d be only too happy to get their hands on your money.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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