Why Choose A Structured Settlement Over A Lump Sum Payment

Sitting down with your attorney to iron out the final details of a settlement agreement stemming from injury sustained from a person or company being negligent, you discover you have two payout options.  The first is to receive the entire amount of the award in one lump sum and the second would be in the form of a structured settlement in which you would receive scheduled payments over years or life.  If you are like most people in this situation, the initial response is to take the money and run but before you signing anything, we encourage you to read the information provided in

Sitting down with your attorney to iron out the final details of a settlement agreement stemming from injury sustained from a person or company being negligent, you discover you have two payout options.  The first is to receive the entire amount of the award in one lump sum and the second would be in the form of a structured settlement in which you would receive scheduled payments over years or life.  If you are like most people in this situation, the initial response is to take the money and run but before you signing anything, we encourage you to read the information provided in this article so ultimately, you make the right decision.

We wanted to cover information as to why you would choose a structured settlement over a lump sum in the form of pros and cons for both options.  One of the best methods for how to decide between a structured settlement and a lump sum payment comes from making comparisons of the pros and cons, as outlined below.

Pros and Cons of a Structured Settlement

Although we provided two pros and two cons, you would find far more advantages of choosing a structured settlement than you would disadvantages.  However, the information below gives you a good idea of both good and bad aspects for this type of agreement.

•    Pro – Although there are many positive aspects of a structured settlement, most people agree the security resides near the top of the list.  Knowing payments would be received as scheduled brings a sense of peace and security.  If you became disabled as a result of injury, making it near impossible to work on any level then knowing you would receive money through the agreement is worth its weight in gold.
 
•    Pro – One benefit of choosing a structured settlement over a lump sum payment is that no tax would be charged at the state or federal level.  If the amount of your settlement were relatively small or if you had concerns about the amount of potential tax, then going with a structured settlement would by far be the better choice.

•    Pro – Although interest would not accrue on payments from a structured settlement, any money left over after paying for medical bills, cost of living, and so on could be invested.  Profit coming from your investments could earn interest so this needs to be considered one of the advantages to a structured settlement.
 
•    Con – One of the last negative things about a structured settlement is that as soon as you go through with this type of agreement, the only way to change that decision would be to have a structured settlement company buy the payments but this comes at a high price.

Pros and Cons of a Lump Sum Payment

Moving on, we wanted to also offer you some pros and cons of a lump sum payment over a structured settlement.  Again, we tried to balance out the good and bad but most experts and recipients agree that the lump sum option is the lesser of the two.

•    Pro – If you were left with significant medical bills, attorney fees, and other expenses associated with being injured, having all the money at once would allow you to pay everyone off.
 
•    Pro – Depending on the amount of money awarded through the settlement, choosing the lump sum payment would provide you with a significant amount of money to invest.  If you make high yield investments that perform well, making the decision of the lump sum payment would be ideal.
 
•    Con – When all done and said, the amount of a lump sum payment would likely be less than that of a structured settlement.

•    Con – The number of people who over spend or run out of money prematurely when choosing the lump sum payment option is high.  Although the goal is to budget and spend wisely, having a lot of money available is simply too tempting for most people.

Although brief, as you can see from the information provided there are viable reasons why you should choose a structured settlement over a lump sum payment.  While taking all the money at once has its purpose, overall setting up payments long-term would serve you best.