Potential Disadvantages of Structured Settlements

Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home, or other expensive item, yet be unable to muster the resources because they can’t borrow against future payments under their settlement.

Some people will do better by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.

The choices vary, what may be good for some may not be good for others. It all depends apon one’s own situation and abilities to use the funds wisely. Quite often people make hasty decisions when it comes to structured settlements without giving it real thought. It helps to get advice from a financial advisor or attorney when it comes to these matters.

Advantage of a structured settlements

 The advantage of a structured settlement payment is that you save on taxes. You will pay taxes on only what you receive, i.e. if your settlement was for a million dollars and all you want to get is three thousand dollars a month, your taxes will be based on thirty six thousand dollars annually.

 The disadvantage of the structured settlement payment is that once you make the deal you cannot opt out of it. If however, you do need more money in the interim your negotiations in the beginning should consist of a factoring settlement transaction. This would allow you to sell or otherwise encumber either a part of or all of the payments and receive a lump sum. This is considered a Structured Settlements Cash Out.