How to manage your Structured Settlement

Structured settlements are used in a number of various cases. However, one of the most common uses of structured settlements are as a means of settling a personal injury suit. Because structured settlements deal with a large amount of money, it is important to know just how to manage these funds.  

Here are some key points to consider when managing a structured settlement, particularly the tricky process of negotiation. 

Components of a structured settlement

A structured settlement mainly consists of annuities, or regular payments, that lasts for the expected duration of the claimant’s losses (normally a long period of years). A structured settlement also commonly includes an initial lump sum to cover the recipient’s immediate costs, such as medical bills.
 
A structured settlement may also be negotiated such that a regular lump sum should be payable to the claimant. These lump sum payments can be justified by regular large expenses, such as replacement of prosthetic limbs or wheelchairs, for example.
 
Different types of annuities can suit different purposes. For an older recipient or someone with no dependents, the most common type of annuity, which is for life, is suitable. This simply means that annuity payouts cease when the recipient dies. For a recipient with dependents, a designated term settlement that lasts for a fixed number of years is a viable option. In case the recipient dies during that period, his or her beneficiaries will receive the remaining payments.

During negotiation

It may be more tempting to have a lump sum payment, a “one-time, big-time” payout rather than a series of smaller payments over many years. However, structured settlements ensure that the money is spent wisely on ongoing needs. Especially in personal injury cases, the losses can be long-term and ongoing, such as a drastically reduced capacity to work and earn income.

Longer-term issues are much more well-covered and well-considered by a structured settlement than a lump sum payment. An added bonus is that unlike regular income, structured settlement payouts are tax-free.

Structured settlements come into play only when damages are large enough to warrant compensation over a long period. Personal injury settlements can be negotiated prior to a court case or by court order; they cannot be enacted once the court has conferred a lump sum judgment.

Get expert advice

During negotiation, it is important to have an expert on hand for advice. Usually, the attorney handling the claimant’s case will take care of the negotiation and advise his client on the best terms to negotiate for. Since structured settlements are entirely negotiable, make sure that you work closely with your attorney to assure that all your needs and preferences are met.
 
Bear in mind, however, that not all attorneys are conversant with the best deals available for a structured settlement. In this case, they may call upon the services of a structured settlement broker. The broker will offer you a number of different payment plans based on your situation, preferences and needs. They are vital to a good negotiation, but the do charge a small fee—so do some background research on your broker to make sure he’s worth what you’re paying.

Apart from legal expertise, you should also have medical advice, since estimating future losses can be very tricky. A doctor should be on hand to properly estimate future illnesses or injuries resulting from the initial injury.
 

Don’t rush!

Once a settlement has been agreed on, it cannot be changed. Certain clauses in the agreement may also prevent the settlement from easily being sold for a lump sum. This is simply to protect the recipient from being swindled out of their settlements.

In addition, it is vital that the negotiated agreement provide insurance to cover your annuity payments, in the event that the company tasked with paying them becomes insolvent.

Resist the temptation to rush the negotiation of a structured settlement simply because you want to get the money or get all the paperwork over with as soon as possible. Remember, this money is for the long haul, so take your time and be very careful. .
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