Should I Take A Structured Settlement?
If you've recently settled or been victorious in a legal case, then you are likely going to receive some kind of damages or award. Depending on the nature of your settlement you may have a choice between receiving your damages in the form of a lump sum, or as a structured settlement. Some people need money now, and those individuals may benefit from a lump sum. Structured settlement means that your damages are paid out according to a pre-arranged schedule, detailed in a structured settlement agreement. So should you take a lump sum or a structured settlement? Factoring in the different benefits and disadvantages of each option will help you decide.
Structured Settlement vs Lump Sum
When it comes to a lump sum, the benefits are fairly clear. You are given cash up front to cover the damages outlined in your settlement. This means you have immediate access to liquid capital to pay bills, fix your home or car, cover tuition, or invest. If you have a sound financial plan and are good at handling money then you might do better to take a lump sum. However if the incident that resulted in your award causes you trouble further down the road you won't have any recourse to secure more funds. This could leave you with a stack of hospital bills that you aren't ready for, or in some other kind of trouble. This shows how lump sum payments don't necessarily provide the same security as a structured settlement.
Structured settlements and period payment judgements set up a system where your award for damages is distributed to you over a period of time at agreed upon intervals. The payments are usually structured to be disbursed when you are likely to need the money the most. This provides you with more security. However, it is incredibly hard, if not impossible, to alter the schedule of these payments, so if you need money and don't have a payment scheduled, or if the scheduled payment isn't enough to cover your bills, then you have little recourse. One option is to sell your structured settlement. There are many companies always looking for structured settlements for sale, and they will pay you a discount rate in cash for your structured settlement payments. You won't get as much as the value of your settlement, but the money will be there, able to be used.
As you can see, lump sum payments and structured settlements have their advantages and disadvantages. Make sure to weigh them carefully when deciding how to receive your award for damages.