After receiving a structured settlement agreement, you might ask yourself — what next? The options and intricacies of these legal arrangements can often seem confusing and overwhelming.
In fact, many people wonder what they are agreeing to at all. The most important thing to know is that the monetary reparations you are receiving are intended to help you recover from whatever injury or unfair situation you were placed into, and are supposed to be a boon, not a complication. Here are some fast facts about your structured settlement, and how you can use it to decrease debt:
A structured settlement agreement is a financial arrangement where a claimant agrees to receive periodic payments, rather than cash in a lump sum, after resolving a suit, such as a personal injury lawsuit, or winning money in a lottery.
The resulting annuities have payout periods most often at two lengths — either over a course of 25 years, or until death. However, payment plans and periods can be tailored to your individual needs or financial challenges. Recipients of these plans also have the option of receiving cash for their settlement by selling their annuities to a company that specializes in buying.
Structured settlements were designed to ration the money from a case or lottery winning in response to the high rate of spending that is common with most recipients. The Rutter Group’s insurance industry statisticians have shown that 25-30% of accident victims use all the funds from their settlement agreements with two months of recovery, and 90% use all the money within five years.
Regardless of whether or not you decide to sell your annuity or keep on reviving the monthly payments, receiving a settlement can often be lifesaving. In total, American’s owe more than $11.91 trillion in debt. In February 2015, there was a daily average of 3,422 bankruptcy filings. One huge benefit of receiving the monthly payments , structured settlement payments are totally exempt from income, dividend or capital gains taxes — the same goes for any payments received by your estate or heirs. This added income could make the difference between remaining in debt and propelling your self into positive numbers.