A structured settlement is a settlement used by a court of law to compensate an injured party in a case involving negligence, usually a tort. When it is settled in lump sum, this means that the defendant gets to pay the plaintiff a given amount of money in full. However, before the plaintiff accepts a full amount of settlement at the end of the case, he or she has to consider some factors.
Factors to consider before accepting structured settlement lump sum
Begin by considering length of the structure, in that, the amount of time it would take to get pre-determined payments usually in installments. This helps one in planning their financial future. Proceed to checking how often one would require to receive each payment and how much money it would be worth.
In addition to this, consider the beneficiaries of the lump sum payment. This is how each of them would survive in case of an event or uncertainty like the death of the plaintiff. A settlement should also be easily transferable to beneficiaries.
Pros and con of structured settlement lump sum
An advantage of lump sum settlement is that they enjoy a substantial tax benefit is settled in full. This is as so long as there is a claim to the tax returns. In addition to this, it is mandatory for plaintiffs to get professional guidance and advice on how to manage lump sum funds in order to cover future expenses, like college fees.
Another advantage is that lump sum settlements can be customized in order to meet immediate expenses that may be bothering the plaintiff. This is especially in the case of debt repayments and cost of rehabilitation and medicine of the plaintiff.
A demerit to lump sum settlements is, as much as there is settlement of immediate expenses such as college fees, there lays uncertainties in the future. This is where a plaintiff may fall sick, negative changes in economic conditions such as inflation. Lump sum settlement may not be able to cater for this.
At times, insurance companies may not be at liberty to disclose full information as to why lump sum settlement is vital to plaintiff. This restricts the plaintiffs’ ability to assess its drawbacks or advantages in the long run.
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