When you win a civil lawsuit, your immediate reaction is probably a relief. Finally, you’ll be able to pay off your medical bills and make up for your lost wages.
But do you actually know how lawsuit settlement payments work?
Often, near the end of a civil lawsuit, you may be able to opt for a structured settlement instead of a lump sum settlement. But what are structured settlements? And how do you know if it’s the right choice for you?
Keep reading to learn about structured settlement benefits and drawbacks, and whether they may be right for you.
What Is a Structured Settlement?
Structured settlements are most often used in civil lawsuits where a person’s damages will be long-lasting. For example, if you sustain a permanent injury, you’ll need to pay for medical care for years to come.
This is different from smaller, short-term matters that are settled by civil suits. For example, if you sue someone who broke your laptop, it makes more sense to take the entire payment at once. This is a lump-sum settlement.
Structured settlements are designed so that the plaintiff has access to the settlement throughout the rest of their life. This could be for ongoing medical bills, lost wages, or any other damages that will reoccur in the future.
When you choose a structured settlement, you choose to have the payment divided up and sent to you on a set schedule. For example, if you win $1 million, you could choose to schedule a payment of $100,000 every year for the next ten years.
There can be large differences between lump sum and structured settlements. A large lump-sum settlement is most likely subject to taxation. Smaller payouts over time may not be subject to taxation (or the taxes will be less severe).
Benefits of Structured Settlements
With structured settlements, you are afforded a certain amount of flexibility that a lump sum does not offer.
When you win your civil suit, a structured settlement may be the best option for you at the time. But life happens quickly, and your circumstances can change.
If you have a sudden emergency, whether it’s related to your lawsuit damages or not, you may want to consult with a firm that purchases structured settlements and who can front you your cash immediately.
A firm will appraise your structured settlement’s current value, and then pay you the remaining settlement amount now in one lump sum. You won’t get any future payments, but you should receive approximately the remaining settlement amount.
Then, the firm who purchased your settlement will continue to receive the future settlement payments, since they now own the settlement.
However, be careful when you look around for a settlement purchasing firm. Some well-known names, such as JG Wentworth, have been known to scam sellers by low-balling their settlement’s actual value.
Explore Your Structured Settlement Options
If you are considering choosing structured settlements or selling your current structured settlement, you should be diligent in your research.
Many trusted firms will give you a free quote before you commit to selling your settlement. Keep browsing our site for more articles to see if selling your settlement is the right choice for you.