Structured Settlements have been a part of our lives since the 1970s. There are some known advantages and the unfortunate disadvantages attached with them that are difficult to ignore. Over so many years of its inception and usage, one thing is clear that it is one of those funds that do benefit the claimant and help secure his family for a long time through periodic settlements or by making provisions for a lump sum amount should he choose to sell a part of it. The Government has made honest efforts all the way to help people gain from the scheme by making it tax free and by applying judicial watch over the sale of the same. However, there can be some definite cons of the Structured Settlements too that can be classified.

The innumerable benefits of the Structured Settlements

You should first make a sum of the various pros of the Structured Settlements Act. You may be aware that amounts paid “on account of” an injury or death resulting from that wrongful injury is exempted from income tax under the section 104(a) (2) of the Internal Revenue Code. This tax benefit remains with the plaintiff till he does not take the control over his funds. Also, it is human psychology that when the settlements are awarded on a lump sum basis, people have squandered the money away in a very short period of time, never giving their future security any thought. But with the amount divided and preserved through the Structured Settlements, they can now enjoy the fruits of the money sometimes all their lives and do not have to be dependent on the Government for basic support.

The role of the Insurance agencies in the Structured Settlements

Annuity funds are generally managed by a third party- the insurer who is professionally apt to look after the settlements’ money and its imbursement. At all times, the annuities are customized according to the needs of the plaintiff and also take into account his future contingencies. You may think of other things as to how your dear money can be kept safe with the insurer. To cover this point too, such annuities with the insurer are also under the protection of the State Insurance laws that in turn cover the services of the insurer who may go bankrupt. The provisions within your Structured Settlements cover all your immediate medical bills and debts and other rehabilitation costs that will secure you financially and also account for all the future expenses through its designated periodic payments through detailed negotiations before settling on to one unique settlement tailored for you.

Court approval- a must for handling the Structured Settlements

During all the proceedings of the Structured Settlements whether it is framing of the settlement clauses while being awarded or sold later for any valid reason, you should have a proper representation through a specialist lawyer that will look out for your interests in the court proceedings. The other good thing about the Structured Settlements is that it needs judicial intervention every step of the way. Even if you wish to sell the settlement, the judge has to declare it legal in accordance with your need to sell it. The buyer is bound by the law to provide you of all the necessary information before any deal can be concluded. This information also includes the disclosure of the amount that he is promising to pay you against your Structured Settlement in comparison to the amount that the plaintiff may have gained as periodic payments over a period of years cumulatively.

Some cons of the Structured Settlements as encountered by the owner of the Settlements

There can be however some potential disadvantages of the Structured Settlements. As sketched out in people often feel at a disadvantage if they do not have the full control over their own money. There can be the following disadvantages-

  • Some may feel trapped because they cannot make any expensive buys against their settlement money since the money is not given to them in one go.
  • There are others who feel that they could have done a better job in investing the money rather have them with the insurance agencies.
  • You may even lose the tax benefit if you take the control of funds in your own hands.
  • Annuities placed with inappropriate brokers may not have the appropriate protection against insolvency.
  • The clauses or the settlements’ structure once decided upon are generally rigid and will involve a lot of legal proceedings if you want to make any changes in them when need arises.
  • In untoward economic conditions like recession and inflation, the periodic payments’ amounts may just appear too small against the needs of the person holding the settlement.
  • Sometimes too much of the legal interference in the matter may feel too tedious and time consuming.

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