Structured Settlement Annuity – Pros And Cons

One of the greatest advantages of a structured settlement annuity is the tax benefits.

Assuming it’s setup properly, the structured settlement owner can experience a huge tax relief… in many cases you can even receive all of it tax-free!

The thing that makes structured settlements different from lump sum, is that payments are received periodically over time instead of all at once.

For example, let’s say John has an accident at work and is awarded a $100k structured settlement. John *will not* receive it all at once but in agreed upon periodic payments.. (i.e. $10k/year for 10 years.)

So are the periodic payments a good thing?

That depends on John’s specifics:

• How good is John at managing his money? If his spending habits are bad then it’s probably better for him to get monthly payments (because he’d blow the lump sum away too quickly!)
• Is John in an urgent need for money now? Perhaps he was hurt on the job and has many out-of-pocket medical bills. Or maybe his on-the-job accident set him back on his mortgage and put him in danger of losing the house? A lump sum might be the way to go.
• Is John a savvy investor? He might do better taking the lump sum and investing the amount on his own. This way he can get a better return on his money in the long term.
• Does John want to buy a home but doesn’t have the credit? It’s a stretch to think that a lender will give you money against future payments of your structured settlement. A lump sum payment might be the only way for John to buy the home he wants now.

In any case, I always *strongly* recommend talking with at least a trusted financial advisor before making decisions on settlement specifics.

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