A structured settlement is an agreement between two people where a sum of money is to be paid from one to the other. Rather than paying the entire amount that is owed all at once, the structured settlement sets up an annuity. An annuity is a set sum of money that will be paid to the recipient every year until the funds have been depleted.
On example of a time when a structured settlement is warranted is when someone wins a lawsuit. In the event that a plaintiff sues someone for damages that were done to them, the jury has the choice to decide in favor of the defendant, meaning that the defendant did not cause the injury to the plaintiff. If that happens, the plaintiff does not receive a monetary award. If the jury does determine that the defendant’s actions did cause the plaintiff’s injuries, the plaintiff will be entitled to compensatory damages.
Once the jury has decided in the plaintiff’s favor and has chosen the amount of money that the plaintiff deserves, the parties can decide on whether or not the money should be disbursed in one lump sum or in an annuity. Anytime that the plaintiffs decide they will receive an annuity, the defendants in these cases will be ordered to purchase structured settlements. These structured settlements will have a few advantages over the lump sum that is deposited into the plaintiff’s bank accounts.The first advantage is that the plaintiff will not be able to spend the money in an unwise fashion in less than a year. With most of the money out of their hands, plaintiffs have to wait to receive their money on a yearly basis or a monthly basis, depending upon the terms of the agreement. Since the annuity is meant to last throughout the plaintiff’s lifetime, their structured settlements ensure that they have this income for life.
The other advantage that structured settlements offer is tax advantages. Another type of payment that is often accepted as an annuity is for winners of the lottery. These people can win enormous sums of money, but the amount is taxed on the state level as well as locally; this can result in the reduction of their winnings by 50 percent in some cases. When lottery boards purchase structured settlements for their winners rather than offer the lump sum, their winnings are not taxed at as high a rate as the lump sum would have been.
On example of a time when a structured settlement is warranted is when someone wins a lawsuit. In the event that a plaintiff sues someone for damages that were done to them, the jury has the choice to decide in favor of the defendant, meaning that the defendant did not cause the injury to the plaintiff. If that happens, the plaintiff does not receive a monetary award. If the jury does determine that the defendant’s actions did cause the plaintiff’s injuries, the plaintiff will be entitled to compensatory damages.
Once the jury has decided in the plaintiff’s favor and has chosen the amount of money that the plaintiff deserves, the parties can decide on whether or not the money should be disbursed in one lump sum or in an annuity. Anytime that the plaintiffs decide they will receive an annuity, the defendants in these cases will be ordered to purchase structured settlements. These structured settlements will have a few advantages over the lump sum that is deposited into the plaintiff’s bank accounts.
The other advantage that structured settlements offer is tax advantages. Another type of payment that is often accepted as an annuity is for winners of the lottery. These people can win enormous sums of money, but the amount is taxed on the state level as well as locally; this can result in the reduction of their winnings by 50 percent in some cases. When lottery boards purchase structured settlements for their winners rather than offer the lump sum, their winnings are not taxed at as high a rate as the lump sum would have been.
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