The Pros and Cons of a Structured Personal Injury Settlement

personal injury attorneyThousands of personal injury claims are filed each year. However, most of these personal injury lawsuits never make it to a jury trial because the parties reach a settlement prior to the commencement of litigation. A settlement requires the individual who brought the lawsuit (known as the plaintiff) to drop the suit in exchange for receiving some sort of monetary payment from the other parties who allegedly caused the accident (known as the defendant) or their insurance carrier. These settlement payments can either be paid all at once (known as a lump-sum) or in payments over a period of time (known as a structured settlement).
This article discusses structured settlements in more detail and further discusses the pros and cons of such settlement payments.

What Is a Structured Settlement?

A structured settlement is known as any type of arrangement that provides the individual bringing the lawsuit with regular payments over the course of a specific and agreed upon period of time or even for the rest of the plaintiff’s lifetime.

Structured settlement payments are typically preferred when the plaintiff suffers a serious and permanent injury, such as a complete spinal cord injury, and requires care and treatment for the rest of his or her life. In such situations, the defendant’s insurance carrier generally funds an annuity policy for the plaintiff, which provides the individual with a continuous stream of income over the terms of the structured settlement.

Although structured settlements may seem like the perfect option, the terms can get complex and should be discussed with an experienced attorney prior to agreeing upon the terms.

The Pros and Cons of a Structured Settlement

Below are some pros and cons of structured settlements that should be considered:

Pros:

  • Provides you with a substantial tax benefit (only applicable when the settlement would be taxable)
  • Provides with better planning because it prevents you from spending all of your settlement in one shot, since you will get the proceeds over a specific time period
  • Annuity funds provide for better financial planning since these types of funds must be managed by a professional
  • Annuities can be tailored to cover your special needs

Cons:

  • Retaining too much control over the structured settlement proceeds may result in the IRS forcing you to forfeit the tax break
  • There is the possibility that unknown changes in the economy could make the annuity payments much smaller
  • The annuity payments may be placed with brokers who lack sufficient protection for insolvency
    You and your personal injury attorney need to look at your specific situation to determine whether a structured settlement is the right option for you.

Consult with a Personal Injury Attorney in Los Angeles

If you or a loved one has been seriously injured in an accident that was caused by the negligent actions of another party, you may be entitled to monetary compensation. For more information or to schedule a free consultation with an experienced bicycle accident attorney, call the Law Offices of Samer Habbas today at 888.848.5084.

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