What is a Structured Settlement? The Important Things to Understand

Are you wondering what is a structured settlement? If yes, you should click here for our guide on the important aspects to understand.

Continue reading this article to get the information you need about structured settlements.

When Would a Structured Settlement Happen?

A structured settlement is a tax-free settlement that is negotiated between the plaintiff and the defendant that is paid out over time in a series of set payments.

Some of the common cases that might require structured settlements are:

  • Vehicle accidents
  • Workplace accidents
  • Prescription drug side effects
  • Slip & fall situations

There could be other instances, but these are the most common.

Selling Your Rights to Receive Payments

People don’t own structured settlements. Insurance companies own the annuities that are the structured settlements.

These insurance companies are responsible for giving you the money as the contract is laid out.

When you sell all or part of your annuity, you’re selling your right to collect payments.

Pros & Cons of Selling Your Rights

When you need money in a hurry, you might see nothing but good coming out of selling your rights to your structured settlement.

Keeping your structured settlement allows you to have a continuous flow of money over the set period of time. Whether that is to get you on your feet or keep you going throughout your lifetime.

Structured settlements are also tax-free, unlike some parts of a lump sum payment.

To sell your rights, you do have to convince the judge that it is within your best interests. If the judge doesn’t agree with you, you have to keep accepting the structured settlement payments.

The Process of Structured Settlements

To get a structured settlement, the process starts in court.

As the plaintiff, you may be awarded money due to an injury, or you may settle outside of court before you go before a judge. Some companies opt out of going before a judge because they don’t want to drag things out.

If you choose to accept the structured settlement from the defendant, you are likely releasing them of all further liability.

The defendant purchases an annuity through an insurance company in order to keep from having to continue to make payments. Once they take care of these arrangements, they no longer take care of the payments, but the insurance company is the one that deals with getting the payments to you as they were set.

What Is a Structured Settlement? – Now You Know

Now that you have the answer to your question, “What is a structured settlement?”, you can move forward wisely, understanding the full picture.

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