The Advantages of Structured Settlements
Regardless of a particular settlement's design, structured settlements may have distinct advantages over an immediate lump sum. In most cases, both the defendant and the plaintiff will benefit.
The defendant (who may be a corporation, liability insurer or government agency) benefits through a faster, more efficient resolution, reducing the cost of prolonged litigation. Also, by assigning the obligation of payment to a financially sound third party, the defense can feel secure knowing all future payments will be met.
Plaintiffs benefit by securing a guaranteed income tax-free stream of payments. Free of the pressures of money management and the potential for dissipation of funds, the plaintiff can enjoy the peace of mind of financial security.
While structured settlements obviously have these advantages, consideration should be given to individual situations before making a final decision.
Several of the major advantages for considering a structured settlement are:
- All money paid to a plaintiff for physical injury damages under IRC Section 104(a)(2) can be income tax-free regardless of when received.
- The results of the settlement are guaranteed.
- There is no cost for the management of the settlement funds.
- Periodic payments may be designed to specifically fit the needs of the plaintiff.