There are many advantages to selecting a structured settlement over a lump sum award. Most importantly, a structured settlement is guaranteed to provide for the future needs of the injured party. In fact, most of the time, a structured settlement will provide for the personal and medical needs of an injured person for their entire lifetime. Lump sum awards, on the other hand, often end up being squandered through poor investment strategies, overuse, and the ups and downs of the stock and investment market. The American Association of People with Disabilities endorses structured settlements, arguing that they can be the best and safest means of making sure an injured person who wins a tort case is provided for throughout their lifetime.
A second advantage of the structured settlement is the unique way it is handled by the tax code. Most of the time, annuity payments are untaxed, meaning that more money makes its way into your pocket. Lump sum payments, on the other hand, can incur a substantial tax burden.
Structured settlements are also highly flexible. In fact, no two structured settlements are the same, because each one is arranged to take into account the specific present and future needs of the injured party. For example, some people will want to receive a small annual sum, while others may want to receive several larger sums distributed every few years or arranged around significant life events. Structured settlements can also be arranged to provide more money for the claimant later in life or more money as the claimant's medical condition worsens. There are no limits to the different possibilities of the structured settlement, because it is a private arrangement between claimant and defendant.
Finally, structured settlements have a number of unique advantages that end up increasing the net amount of award money for many people. For example, your money cannot be reduced by divorce or the receipt of social security. In addition, you may end up netting a larger award because you have to pay out less for lawyer and court fees incurred during a lengthy court battle.
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