You have probably heard the expression "Structured Settlement" on a television or print ad and astonished what it meant. In any case, the term is not a part of our everyday glossary.
A structured settlement is an agreement under which an insurance company assumes to make periodic payments to an injured party as part of a physical injury claim settlement or to surviving relations to whom a large settlement has been awarded. These are just two illustrations of where a structured settlement might be used. Generally, structured settlements have become popular because they propose considerable reimbursements to all parties caught up in the settlement harmony.
I am saying that a brief review of the dictionary discloses the following definition: a structured settlement is as simply a financial package that allows a settlement to be paid in regular payment installments for either a set period of time or more than a life span. In brief, a structured settlement is a package that is tailor made for the individual or payee by the payer or an interested third-party. Likewise, some structures include immediate payment to cover any special damages that may have taken place or will happen.
As I know that the system of structured settlements was first established in Canada in the early 1970's and it was spread into the United States very rapidly. After that, within a few years, the idea had found its way to several countries including Australia and most member states of the European Union.
Uses and benefits of a Structured Settlement
A structured settlement annuity provides a payment stream that is tax-free over a determined period of time. A large amount of investment options such as stocks and bonds, real estate, savings accounts, and similar vehicles simply cannot match the flexibility and safety measures of a Structured Settlement Annuity. This is one of finest option of structured settlement.
Like wise, another benefit of a structured settlement annuity is that it can be designed so that payments are made over an extended period of time, even throughout the life of the payee. In the event of the recipient's death, a guaranteed portion of the settlement may be paid to the person's estate or to a named recipient. This is also a good option. People must know about this option.
Structured Settlement has become quite common and offers the added safety measures of regulation by both Federal and State statutes. There are also many provisions in IRS and Medicare/Medicaid guidelines which take them into account.
Substitute to Structured Settlements
It's somewhat easy to observe that a structured settlement can work to the advantage of all parties in a variety of situations. On the other hand, there are occasions when the beneficiary of a structured settlement would prefer not to have periodic payments, preferring instead a lump sum payment. Such might be the case where an individual would like an amount of money to procure a home, perhaps to cover bulky medical bills or to pay off a mortgage.
This option has also proved particularly popular with lottery winners. There are a number of insurance companies and others that offer this service for a charge. In such instances the insurance company or another interested third-party makes the lump sum payment with a charge for operating expense and interest subtracted. It is very important to think about these fees and read the fine print with awareness to be sure that you are not signing away the bulk of your payment.
How do the alternatives work?