Why Is A Financial Settlement Preferred Over Legal Battles?
Structured settlement is an arrangement made when a plaintiff settles a case for a large amount of money that is to be paid by the defendant in installments over a period of time, instead of as a single lump sum. This arrangement is often done in consultation with a certified financial planner and the plaintiff’s attorney.
What are the Benefits?
- In most situations, closing a legal case with these settlements can reduce the risk for both the sides. Such arrangements are often hypothesizedv by defendants who fear they may have the liability. So, making an offer can help them minimize the expenses on the fees of a legal consultant and the future penalties levied by the court.
- The payments can be scheduled as per the convenience of both the parties. It can be paid in annual installments over stated number of years or in regular lump sums once in every 2-3 years.
- These plans can assistance the plaintiff as it ensures a steady stream of cash over a stated number of years. These payments typically earn almost double the yearly rates of Government or Municipal Issued Treasury Securities and Bonds.
- Defendants can assistance from such a plan, as they do not have to pay a huge amount of money at one go. This gives them enough time to position the amount. The regular payments can be managed by defendants by the buy of annuities that guarantee future payments.
- One meaningful advantage of such arrangements is tax avoidance. The tax advantage is attained at the Federal in addition as at the State level. It should be noted that the returns derived from a lump sum are unprotected to both Federal and State taxes.
- An injured person with special needs may assistance from the regular lump sums received from a structured settlement as it can help them to buy medical equipments and alternation vehicles.
- It can protect a beneficiary from having their settlement funds dissipated faster, when they may be required for paying future needs. Sometimes, already a large fund may get rapidly depleted. But regular payments prevent rapid exhaustion of the amount and ensure a steady flow of money over several years.
- Seniors are usually the target of greedy people when a large pot of cash is obtainable with them. This may put them at a risk of getting duped by conmen. Settlements structured as installmentsmean a smaller pot of cash, which is not that attractive to the conman. It helps to keep opportunistic people away and secures the beneficiary’s source of income.
What is the Gain for a Purchaser?
Whenever the person receiving benefits of a structured settlement, wants to sell the remaining payments in whole or a part, the cash flows can be sold at a discounted rate in exchange for the total remaining sum. This discounted settlement is later obtainable for sale to the person who purchases it.
- This particular way of securing the discounted payments directly from the seller helps the purchaser to get popular yields. Purchaser receives much higher yields than they may obtain from similar fixed rate investments like deposits and bonds.
- Purchasers also receive a fixed income for a certain period of time based on the defined parameters of the settlement.
- This arrangement is supported by annuity contracts that are issued by rated insurance carriers.
Any Point of Concern?
These plans require beneficiaries to wait to acquire funding so they do not provide the flexibility required for managing immediate expenses. In other words, people cannot depend on them for emergency cash requirements.
A structured settlement can be quite comforting for the plaintiff in addition as the defendant. After all, it’s nice to receive a steady monetary flow for a set period of time. It is the best option for those who do not need money now. This is considered a win-win position for both the parties locked in a legal battle.