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What are Structured Cash Settlements?

By Edited Nov 13, 2013 0 0

What are Structured Cash Settlements?

A Structured settlement is a simple thing really. A structured cash settlement is a series of payments you get over the course of time. For example, if you win a large amount of money by either the lottery or through gambling at a casino, you will generally have two options in which to get your winnings. The first way is getting your cash in one lump sum, although it will be less than the amount you actually won. Sometimes it will be considerably less than what you may think you are getting. Than Uncle Sam steps in to take their tax from it, which is always a huge amount and you are left with sometimes less than half of what you indeed thought you were winning.

               That brings us to the other options to your winnings, and that is a structured cash settlement. This means you will get a much closer amount to what you have won, but you will not get it all in one lump sum. Instead you will get a chunk of your winnings every month or every year, depending on how you are offered your cash prize. This is sometimes looked at the better way to get your money if just because you get more of the money you have won. It also means that you will be forced to limit your spending and will allow you to keep yourself from blowing your prize money all in one go. Of course it is not just winnings. It can also be from settlements from court or annuity. This could be the end result of some sort of personal injury, medical malpractice, or a workers’ compensation case.

               Sometimes it may be hard for you to wait for such payments if you go this route. Things do change and you may need more money than you are able to get as time goes by. You may need more money faster than you are able to get access to it. A debt may turn up, an unexpected pricey medical expense, moving into a new home or vehicle, or maybe starting up a business.

               There are many ads floating around that say they can give you cash for your structured settlement. This may seem like a good way to get more cash at a faster rate. Before deciding to do this, you want to make sure you know what you are getting into. You will want to go through your options and make sure that selling your structured settlement is best for you in the end.

               Keep in mind that not all plaintiffs will have the choice of part or all of your settlement will be structured however. Some states require that future damages awards are paid in installments only instead of just one lump sum. Some states even allow a defendant to petition the court to pay in installments instead of one lump sum as well. Although there are times when a plaintiff can pick which way they get their payment, be it a structured settlement or a lump sum, which is good for you, but you still want to choose what will be best for you in the long run.

               Some of the good points of getting your cash through a structured settlement is a possible tax avoidance. Though it is not a sure thing, it would be quite a help. Getting your money over time will also help you spend better which will help you preserve your money. Although you may not have access to the amount of money you need at the time. High commissions on the purchase of annuities are also a drawback to a structured settlement. Also, if each payment you receive is of equal value, the following payments will actually be smaller in real value due to inflation.

               Structured settlements are a common way for those who have been hurt to get an insurance payout. The payments you receive over time makes it less likely that you end up blowing a lump. In some states, you have the option of selling your structured settlements to get a lump sum instead. Doing something like this can be very tempting but does not mean it is the right thing to do. The money you get in a structured settlement are usually tax free but if you sell your structured settlement for one lump sum, you may end up owing state and federal tax. Not to mention that the companies that are out to buy your structured settlements are looking to pay you less than what your structured settlement is really worth. So in the end it means that if you cash out, it can mean that you will get less money than you would get if you just kept getting your payments over time.

               Although there may be some cases where you need to sell your structured settlement instead of keeping it. You may find yourself in some sort of financial crisis in which you need more money and fast. If you do decide to do this, you want to be careful. You do not want to rush into this and sell your structured settlement before you know what exactly you are getting into. You want to be sure of all the possible outcomes for selling your structured settlement for one lump sum.

               You will want to really listen to what an agent is explaining to you if you go through a secondary structured settlement market. You want to be sure you can see through any double talk so that you know the correct questions to ask. As long as you keep your head and pay attention you will not be taken by surprise if your payment is less than you originally thought it would be. You could also be taken by surprise by some sort of obligation that you need to conform to when going with the deal. Make sure you read all the information that is provided to you. This way you can get a feel for the company that you may sell your structured settlement to. You want to be sure you are selling to someone who is trustworthy.

               A good way to check the top companies’ trustworthiness is through the Better Business Bureau. You can also check out reviews from other people who sold their own structured settlements. You do not want to enter a settlement sale unless you need to. It is not something you want to do quickly or without thought. It is meant as a sort of a back up plan, not something you necessarily choose to do first and foremost.  If you need assistance a lawyer can help you with figuring out the short term versus the long term financial consequences of selling your structured settlement. They may also be able to help you come up with a fair selling price. They can also review the proposed contract for the sale of your structured settlement. That way you can be sure that you are protected from future complications. You may need court approval for the sale of your structured settlement and a lawyer could help in this situation should it arise.

               There may be some other legal restrictions to the sale of your structured settlement that you will need to be aware of. Sometimes it may even be impossible to sell them at all, depending on what your specific contract says that you can and can’t do. It all depends on what sort of structured settlement you end up with.

               So again, to reiterate, a structured cash settlement is a simple thing in the end. It is just another way for you to be compensated financially whether it is because of a prize winning or court settlement. Sometimes you just may not have the option of a structured settlement or a lump sum, and then you will not have to fret at making such a tough decision because it will be made for you. As long you do all your research and make sure that you are positive about what you are getting yourself into you should be fine. There are many ways to learn more about the topic of structured cash settlements and there are many people with whom you can talk to in order to make a better judgment call on whether you should take a lump sum or go for a structured settlement payment plan. Just remember that it is most wise not to cash out unless you really need to or you may end up selling yourself short in the long run. Careful planning and research will be your greatest tool financially when dealing with things such as these.

               It is never a bad idea to get opinions from professionals or other people who have dealt with this kind of thing in the past. Get motivated to learn all that you can before deciding which road is best taken by you, because in the end, it will all come down to your decision.   

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