Structured Settlements Are Tax Free
Structured settlements provide a steady stream of cash that is completely free of tax liability, both Federally and at the State level. This is completely different than lump sum settlements where investment proceeds made with them such as interest are subject to both Federal and State taxes.
Structured Settlements Are More Secure
Another benefit to structured settlements, especially for seniors and their adult children, is that there is added security in receiving smaller amounts of cash over time. Many seniors are the target of greedy people and a large pot of available cash can make them an even more attractive target to conmen, and subject them to permanent loss of assets if they are grossly mismanaged by a trustee.
A structured settlement means that there is a smaller pot of cash, which is not nearly as attractive to the conman. Even in the event that there is a financial loss, a structured settlement means that the loss is not as large, and there will be additional income coming in the months and years ahead.
Structured Settlements Are Worry Free
A third benefit to structured settlements is that the recipient doesn’t have to worry about investment strategies or not adequately planning for the future. Those who do not receive structured settlements must concern themselves with making sure that they do not overspend from an account that looks like it should last forever, and subject the entire award to financial risk.
A million dollar lump sum payment looks huge, and a few thousand here and ten thousand there don’t seem to make much of a dent when you look at them individually.
However, investment proceeds from lump sum settlements are not tax-free and attorneys must be paid out of whatever payments have been received. So if this million-dollar settlement is supposed to last for 25 years and a few unwise purchases are also made, it is not impossible to see this million-dollar lump sum settlement effectively turn into 20 thousand dollars per year.
This of course, is hardly a living income much less will pay for any medical expenses. Consequently, many people who opt for the lump sum payment will find themselves on public assistance in relatively short time.
Structured Settlements Are Cheaper
A fourth benefit to structured settlements is that they are often arrived at without the risk and time loss of going to court. For many reasons, defendants who believe they could have liability will make an offer of a structured settlement to minimize their costs.
Few people relish the idea of going to court including defendants because while there is the potential for coming out ahead, there is also the potential for coming out much farther behind than a negotiated structured settlement would give them. In most cases, settling a case with structured settlements can minimize the risk to both sides.
In most cases where the structured settlement is made out of court, attorney fees will be much cheaper than if litigation is required. If your attorney does not need to go to court, you can see their fees be reduced by as much as 8% of the total settlement. On a one million dollar settlement, that means about $80,000 more for you.
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