Are you in one of those periods of your life where you need to pay someone a huge amount but you may not be able to afford it? You may be suffering from a compensation claim and the court may direct you to pay the amount to the other party but what if you see the only way to do it would say, be by selling your home? Don’t you want an easier way out? Well, thankfully, there is the option of structured settlements.
What are structured settlements?
An insurance or financial arrangement whereby a claimant agrees to determine a personal injury tort claim agrees to receive instead of a lump sum periodic payments on an agreed schedule and is known as a structured settlement. This injury could have been caused even through lottery winnings or worker’s compensation claims, etc.
Let us understand when and how Structured Settlements came into existence
Plaintiffs received compensation in large sums, when they won, from defendants in the good old days. It was extremely useful to pay off medical expenses and costs pertaining to the settlement however as most of them lacked the expertise financially to manage large amounts skilfully it proved to be irksome.
In 1982, Congress passed The Periodic Payment Settlement Act. It became very handy to those who did not know how to handle lump sum amounts as the law now encouraged structured settlements when it came to physical injury cases. It also gave legal incentives for those of them who used the new law. Income Tax exemption at all stages be it federal, local or state was extended to all instalments that were paid at regular intervals.
The reason why people receive Structured Settlements is not just because the Federal Act allows it but also to ensure that those receiving the money do not end up blowing it away without rhyme or reason on unwanted expenditure. The settlements that commonly come under this class are workers’ compensation, personal injury and wrongful death.
Let us understand the Pros & Cons of Structured Settlements
The brighter side of Structured Settlements or pros are that the designated beneficiaries are eligible to receive any guaranteed tax-free payments even in the future in the event of premature death of the recipient. A schedule can be drawn out on how much money has to be paid and in how many instalments that may either start immediately or on a later date, either in equal instalments or on an incremental manner, even can include lump sum payment after a period of time. There is no substantial gain or loss like in the case of stocks, bonds, mutual funds, etc. making is more secure and definitive. Interest on these amounts is exempted from capital gains. The entire contrary to the above is the darker side or the consequences and hence less preferred.
To sum up Structured Settlements are here to stay as it has been enacted by the federal Government with a purpose. You can always know more about Pre Lawsuit Loan Information.