Structured Settlements

The decision of whether to take a structured settlement or a lump sum settlement payment in a medical malpractice case can be a difficult task for those involved. Understanding what each type of settlement comprises and what advantages they have will help make the individual’s decision easier.

What is a Structured Settlement?

A structured settlement occurs when money is paid to the plaintiff in several smaller amounts. The payments are generally made monthly and hold several advantages over lump sum settlements. Structured settlements relieve some or the entire tax burden from the plaintiff, making it an attractive option when considering the tax obligations that will fall on the plaintiff.

Taxes are the more obvious advantages when taking a structured settlement, but should not be the only reasoning a plaintiff opts for structured settlements. A structured settlement also helps to keep overspending from occurring; a common error on the part of the recipient who takes a lump sum value instead of structured. Large sums of money create a certain appeal sitting in a plaintiff’s bank account, allowing the recipient to think they may have more money than they actually do. Instead, that money is quickly depleted, leaving the recipient with little to rely on later.

A structured settlement allows plaintiffs to start off with stronger chances of responsible financial planning. Another factor to consider is that structured settlements rise in value over time. The settlement amount can rise in correlation with the cost of living and inflation, resulting in more money over the course of time.

Lump Sum Payments

A lump sum payment is one full payment to the plaintiff in legal cases such as medical malpractice or personal injury cases. There is only one payment and the entire case is considered settled following the lump payment. Receiving all the money from a settlement at once is a great advantage because the recipient can then use the money in any way he or she wishes to; however, because of the disadvantages listed above, individuals may want to take some time to consider which option will benefit them over time.

Seeking professional financial advice is highly recommended when taking a lump sum payment. This allows for greatest growth of the money while keeping spending to a minimum. When properly advised, the money can double or triple over a period of time.
 

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