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Structured Settlements Offer Advantages over Lump-Sum
Payments
by Charles Essmeier
A structured settlement, which offers injury victims cash
payments through a long-term annuity as compensation for their damages and
medical expenses, offer a number of possible advantages over payment in a
lump sum. While the lump sum payment is the traditional way for
responsible parties to pay accident claims, the structured settlement
offers payments over the span of an agreed-upon period of time. This
length of time may span from several years up to the remainder of the life
of the injured party, depending on the severity of the accident, the
amount of money involved, and the agreement reached between the two
parties.
Depending on the specific circumstances of the case, structured
settlements can have numerous advantages over a lump-sum payment:
They are tax free. Thanks to a 1982 change in the Federal tax code,
payments on a structured settlement are free of state and Federal taxes.
The paying party funds the settlement through the purchase of an annuity
which earns the interest to fund the continued payments. This is not the
case with a lump-sum payment, which the injured party must invest
themselves. Any interest earned on those investments are taxable.
They are potentially safer. Most people who come into a large sum of money
suddenly find that they are quite popular with long-lost relatives,
unscrupulous purveyors of investment schemes, and good, old-fashioned
thieves. By receiving payments in substantially smaller amounts, the
beneficiaries of a structured settlement have far fewer worries about
having others take advantage of them, which could leave them both poor and
without adequate medical care.
They are simply less trouble. It’s difficult enough to adjust to changes
in your life if you are seriously injured without having to also take the
new responsibility of investing and managing a large sum of money. Not
only must you invest the money, but you must invest it wisely, knowing
that it must continue to fund your living and/or health care expenses. The
regular payments of a structured settlement, along with their tax-free
status, simplify day to day living considerably.
While they are not ideal for everyone, particularly those who are
experienced investors or those who need a large sum of money at once for
immediate medical expenses or the purchase of a home, structured
settlements can offer a simpler, safer payment solution for many people
who are victims of an accident or injury.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is
the owner of Retro Marketing, a firm devoted to informational Websites,
including http://www.StructuredSettlementHelp.com/
and http://www.HomeEquityHelp.net/ |