A structured settlement works to the advantage for the person injured in an accident. Structured settlements provide a monthly or quarterly payout instead of one large lump sum. This is a more favorable situation for the injured as well as their family members who will be caring for them.
Lump sum settlements tend to be spent immediately and not always on the needs of the injured victim. Statistics show that 30 percent of those who receive lump sums spend the money within two months and 90 percent spent it within five years. This means that if a person requires long term medical care the family members of the victim themselves will have to come up with the money to pay for the needed care. This can cause financial hardship or the person may have to forego care that they should have been able to get.
Structured settlements are tax free. This puts more money in the victim’s pocket or to their beneficiary’s pocket. Large lump sums require a trustee or advisor which can lead to theft, mismanagement or legal woes that may tie up the money. A structured settlement designates one person to receive small amounts over a long period of time. The person who receives the money is generally the one who is responsible for the care of the victim or their dependents.
The company or person ordered to pay the restitution may be able to pay out a larger sum in small increments over time, thus putting more money in the pocket of the victim. In the cases that involve serious injury it is important to remember there may be more side effects that require more medical attention down the road. Structured settlements may be able to include provisions for further necessary medical care. A lump sum payment relieves the responsible party of any further obligation in most cases.
Situations involving minors are best handled with structured settlements. A minor cannot manage their money until they are of a legal age. An attorney or trustee can ensure their money is invested properly and used as necessary for the needs of the child. When the minor is of a legal age, they are entitled to the payout.
An experienced and knowledgeable attorney can provide the best advice. A financial advisor can also give advice on how to handle a structured settlement payout.