Tax-Free Payments and the Benefits of Structured Settlements

When a person has been injured in an accident and requires money for medical expenses, lost wages, pain and suffering, and other such expenses, he may ask for structured settlements to help him deal with the crisis. A structured settlement is a decided financial or insurance agreement through which a claimant settles a legal tort claim by getting part or all of it in the form of fixed periodic payments over some time, instead of as a lump sum.

It is typically used by victims of car accidents, or those who have a history of repeated employment abuses, to be able to make large payments that will help them pay ongoing medical expenses, while they are unable to work. This type of settlement usually lasts for a fixed number of years, making it easier for the victim to budget future money.

In most cases, the victim and the insurance provider agree to structured settlement so that neither one of them feels the need to file for a lawsuit immediately. A structured payment arrangement, therefore, gives both parties time to think things over before deciding on the best course of action. As the victim’s injury lawyer, you will take up the case and negotiate with the defendant for a suitable payout sum. You may also decide to go to court if you feel that the sum being offered is not a fair deal for you.

When people receive structured settlements, they receive payments over some time, usually for an average of twenty years. However, this varies from case to case, as well as with the insurance company that is awarding the payout. If the payout of your structured settlement amounts to less than you are entitled to, you may ask the court to add a short-term interest element to the amount you would ultimately receive.

This would make future income payments correspond with your regular income stream, and give you extra money to help you with your current expenses. This could be used for a down payment on a house, a new car, or something else you desire; the idea is to give you a little extra, so you can use it where it is most needed.

Many people are unaware that there are tax-free payments available when receiving structured settlements. Tax-free annuities are payable on a tax-deferred basis, which means the money you receive is not taxable until you begin to draw it. So, if you were to begin missing installments, the lump sum amount you receive would be taxable, but the tax-free component would remain untaxed until you draw it. This allows you to receive money even in your old age, provided you can meet the monthly payments.

Structured settlements are often considered to be lifetime annuities because the payments are made every year. However, you should keep in mind that the payments are only made once the settlement has been established. Once you miss one installment, the entire amount you were awarded will be due.