What are Structured Settlements?

Are you or someone you love involved in a personal injury claim? You may have heard the term “structured settlement.” While this might sound complicated, our attorneys are here to make it more understandable.

A structured settlement is a financial agreement where the compensation you receive after settling your personal injury claim is paid out over time. So, instead of receiving a lump sum, your settlement is divided into smaller payments spread out over months, years, or decades.

Why would I choose a structured settlement?

You might want to choose a structured settlement for a variety of reasons. For example, these types of settlements provide you with a predictable and reliable income stream, which can be valuable if your injury limits your ability to work or if you require ongoing medical care. Regular payments help make sure you don’t face financial problems in the future.

One big advantage is that structured settlements are tax-free, while the interest earned on any lump sum you may invest is taxable income. Getting a large sum of money all at once can also cause some people to spend impulsively. A structured settlement can help you manage your finances over time.

How do structured settlements work?

A few key steps are involved in setting up a structured settlement.

• After your personal injury case is resolved, our attorneys can negotiate the terms of your settlement. This includes deciding whether to take a lump sum or a structured settlement.
• The at-fault party (or their insurance company) purchases an annuity from a financial institution. This annuity funds your structured settlement payments.
• The insurance company and our attorneys work with you to create a payment schedule that fits your needs. Once finalized, the payments begin according to the agreed-upon timeline.

What are the pros and cons of structured settlements?

Structured settlements do have many benefits, but it’s important to remember that they’re not the right choice for everybody. Make sure you weigh the advantages and disadvantages to determine whether this arrangement aligns with your financial goals.

Pros of structured settlements

• Regular payments ensure you have a stable income and long-term financial security.
• The payments can be customized and adjusted to meet your personal needs.
• Most structured settlements are exempt from federal and state taxes.
• A payment arrangement helps protect against the temptation to spend a lump sum too quickly.

Cons of structured settlements

• Once the payment schedule is set, it’s extremely difficult to change the arrangement.
• If you face an emergency or unexpected expense, you can’t access the entire settlement amount.
• Fixed payments may lose value over time due to inflation.

How do I know if a structured settlement is right for me?

Deciding whether a structured settlement is the correct choice depends on your specific situation. However, consider these questions:

• Do I need long-term financial support? A structured settlement can provide the stability you need if your injury has left you unable to work or with ongoing medical expenses.
• Am I confident in managing a lump sum? Some individuals prefer the flexibility of receiving their entire settlement at once, especially if they have large debts to pay off or want to make investments. If you’re worried about spending the money too quickly, a structured settlement might be your best option.
• What are my future financial goals? If you’re planning for long-term expenses, like your child’s education or retirement, structured payments can help you meet these goals without financial stress.

The attorneys at KBG Injury Law can help you evaluate these questions and decide what’s best for your situation.

Let’s look at an example. Say you were involved in a York car accident, and the insurance company agrees to settle your case for $500,000 payable to you. With a structured settlement, you might receive $50,000 upfront to cover your immediate expenses, like medical bills or car repairs. The remaining $450,000 could be placed in an annuity with  payments to you in excess of $22,500 per year. This type of setup helps make sure you have a steady income while also covering your short-term needs. None of the payments to you would be taxable income.

Can I sell a structured settlement?

We understand that life is unpredictable and circumstances can change. If you find that you need access to the full amount of your settlement, you might wonder if it’s possible to sell the structured settlement. The short answer is yes, but it’s not easy to sell your structured settlement and the terms of the sale likely will be highly unfavorable to you

Selling a structured settlement involves transferring your future payments to a third party in exchange for a lump sum. This can provide immediate cash, but it often comes with significant disadvantages, like reduced payouts due to fees and interest rates. Additionally, you’ll likely need the approval of the court to ensure the sale is in your best interests. The attorneys at KBG Injury Law can help with this process if necessary.

How can your York personal injury attorneys help?

If you’re considering a structured settlement, having an experienced personal injury attorney by your side can make all the difference. Here’s how we can help:

• We break down the pros and cons of structured settlements and lump sum payments, helping you to make an informed decision.
• We negotiate with the insurance company to ensure your structured settlement is fair and meets all your needs.
• Structured settlements involve complex legal and financial issues. We work to ensure everything is handled correctly and in your best interests.

Are you dealing with a personal injury claim and considering your settlement options? Don’t make the decision alone – let us help. At KBG Injury Law, our York personal injury attorneys are dedicated to guiding you through every step of the process, from understanding what a structured settlement is to negotiating the best possible terms. Please call our offices or submit our contact form today to schedule a free consultation.