Structured settlements – What are they and how do they work?

There has been always too much discussion about structured settlements but do you know what they are? A structured settlement is a different kind of annuity that pays you a reward from lottery winnings, worker’s compensation claim or any other personal injury cases, that comes in the form of either a legal settlement or a lump sum with certain tax benefits. The owners of the structured settlements receive periodic tax-free payments over a stipulated period of time in accordance with some terms and conditions and they can also cash out lump sum buyouts. While there are some people who sell off their structured settlements in order to get immediate access to cash, there are some others who hold on to them in order to use them later on. Selling off structured settlement has often been a good way of using the proceeds to repay high interest debt.

A look into the history of structured settlements

For many years, there have been plaintiffs who often won compensatory damages from a defendant and then received lump sum settlements in lieu of that. The recipients used the proceeds for paying for their medical expenses and managing the costs of some other legal settlement. While some people managed their awards well, there were many others who lack the financial know-how that is required to manage such large awards. After the introduction of the Periodic Payment Settlement Act, passed by Congress in 1982, using the structured settlements in physical injury cases were encouraged. Their usage was made legal by amending the federal tax code. This law also stated that payments should be offered in instalments over time and the entire structured settlement payment would not be taxed under the federal and local income taxes.

When do people receive structured settlements?

What are the instances during which people receive structured settlements? Wrongful death cases, worker’s compensation claims and personal injury cases are among some of the most common reasons behind people receiving structured settlements. Here’s a look at the details.

1. Personal injury: When a plaintiff receives a large jury award or settles a claim in lieu of a large sum of money, this amount is usually structured into monthly and annual payments stretched over a particular period of time. The recipients pay for their soaring medical costs and for repaying their credit card debt.

2. Worker’s compensation: Structured settlements are also used to pay off the workers who might have got injured while they were on the job so that they can recover from their injuries.

3. Wrongful death claim: Another common way of compensating the family of a person whose death was yet another subject of a wrongful death claim, you still have to pay them the structured settlement payments.

Therefore, when you’re wondering about the way in which you can use a structured settlement to your favour, you can take into account the above mentioned facts into consideration. You can also look forward to selling off your structured settlements so that you can get immediate access to cash during financial odd situations.

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