Structured Settlements: Pros and Cons
There could be a structured settlement throughout the life of a plaintiff. It is an arrangement that states that the plaintiff should be able to make regular payments. In catastrophic-injury cases, this type of structured payment will be a great help. Usually, an annuity is given by the insurer of the plaintiff. The annuity produces a continuous and steady stream of income over the term of the annuity. Annuity contracts can become quite complex, and may cover a variety of expected expenses.
- The plaintiff may avail of a substantial benefit in a structured settlement. Funds received from an annuity are tax-free as long as the plaintiff does not control the funds.
- Usually, the plaintiff who receive lump sum payments is able to spend five years for the structured payments. After the structured payment, the government can now do its part after the plan. The structured payment is being preserved to last for the life of the plaintiff.
- Professionals manage the annuity. If the settlement is merely a lump sum, there is a danger that the entire amount will be spent immediately and not for what it was meant to be.
- Annuities can be tailored to cover the plaintiff’s specific needs and all sorts of future demands or contingencies.
- In most states, annuities are insured by the state funds to ensure payment to the plaintiff.
- An annuity can be combined with a lump-sum payment to meet immediate expenses, such as medical bills, repayment of debts, rehabilitation costs, and the like.
- A structured settlement can also have funds for unanticipated advances for the uncertain future.
- A structured settlement is able to create negotiations and peaceful settlement between parties which may not be possible in lump sum setttlementts.
- If the plaintiff is able to retain too much of the structured settlement, the income revenue tax department of the state may opt to tax the award gained.
- In spite of the well-predicted plans, there may be economic fluctuations that may affect the performance of the approved structured settlement.
- Sometimes, the annuity is placed with brokers who do not have sufficient protection for insolvency.
- Insurance companies are reluctant to disclose the information on how much they will have to pay to buy an annuity covering the amount of the settlement. A structured settlement is frequently more costly for the insurer. This amount is much less than it would to make a lump-sum settlement. The problem with this is that the plaintiff’s attorney may not be able to make a complete assessment of the merits of the settlement offer.