Structured settlements are getting more popular these days, but what is a structured settlement exactly?
This article will tell you what you need to know about structured settlements, and whether they are the most appropriate choice for you.
What Is a Structured Settlement?
These settlements refer to receiving personal injury compensation not as a lump-sum payment, but as a regular payment over a period of time. This way, you won’t receive your money all at once but it will gradually filter into your bank account. You can read more about what is a structured settlement here.
How Do Structured Settlements Work?
If you win a court settlement claim for $100,000, you can make an agreement with the other party to have this filter into your account through $10,000 payments for the next 10 months.
You can also reach more specific arguments depending on your needs.
- Larger Initial Payment
If you’re in financial need now but would still like to have the money flowing in periodically, you can request a larger initial payment (a higher quantity within the first month) before setting a lower fixed amount for the rest of the time. This means you can still maintain future stability while paying off your current debts.
- Payments Increasing Over Time
You can also create an agreement where the proportions you receive per month keep increasing. For instance, you can start off with 3% in the first few months, before increasing to 5%, then 7%.
- Payments Decreasing Over Time
Conversely, you can have the proportions decrease over time. You start off with 7%, then reduce to 5%, then 3%.
- Delaying Payments
You can choose to receive the compensation claim only once you’ve retired. This way, the money will reach you right when you need it most.
Structured Settlements vs. Lump Sum Payments
How do you decide between a structured settlement or a lump sum payment? The following factors can be taken into consideration when you need to make a choice.
- Your Spending Habits
If you receive a lump-sum payment, will you be tempted to spend it all in one go? If so, a structured settlement will be the better choice for you. This way, you will have an extra set of income for a longer period of time, letting you better manage your spending habits.
- How Urgently You Need the Money
If you really need the money now to pay off lingering debts or to make a big purchase, you can choose the lump sum payment option. Otherwise, if there’s no pressing need for a huge sum in your bank account, you can go with a structured settlement.
Structured Settlements and Money Management
Overall, this article has gone through what is a structured settlement and how choosing this over lump-sum payments can help you better manage your money. This form of settlement can provide you with a fixed income over a period of time, thus providing financial stability.
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