What Is a Structured Settlement?

What Is a Structured Settlement?
By: Steven Ross

Structured settlements are a common occurrence, but yet most people have no idea what they are. In this article, we will discuss exactly what a structured settlement is, who can benefit from it, and how it works.

People are awarded settlements for all kinds of reasons. It might be from an insurance company, or from a claim won in a court of law, due to negligence or discrimination, for example. Whatever the case, the claim that is awarded to you can be received a number of different ways.

For example, one option you have is to take the claim in one payment. This is usually the case when the settlement is small, around $10,000 or less. But what about the settlements that are much larger?

For settlements were large sums of money are involved, it might not be wise to get it all at once. First, taxes would be a headache. And second, having never had a large chunk of money in your life before, how would you know how to manage it?

These are only two of several reasons why it's not always smart to take your settlement all at once. The solution is to set up a structured settlement.

A structured settlement is a contract where you are paid your settlement in installments over a set period of time. For some people, whose damage has affected them for the rest of their life they can create a structured settlement to cover them for the rest of their life. This guarantees they will always have a regular source of income.

Not all structured settlements have to be divided equally into payments. For example, you can choose to receive a certain portion of your settlement up front and then set the rest up to be paid in installments. This is ideal for people who have a large debt that they want to take care of upfront, and still have a monthly payment received from their settlement.

Structured settlements also take inflation into consideration when they are set up. This is to make sure that you get the same buying power from your payment installments 10 years from now, as you're getting today.

In conclusion, I have given you the basic options involve in structured settlements, as well as what they are. Consider this as an alternative, should you be awarded a large settlement. It may just be a smarter option than taking the money all at once.