Structured Settlement

Prior to 1982, if you were injured in accident and awarded a settlement, you had to take it in one lump sum. This one time payment caused a lot of problems for people who did not know how to manage the money correctly. After the injured party spent all of the money on things that were not related to their medical care or injuries, they were left wondering how they were going to pay for their future medical needs.

In 1982, the law was changed to a personal injury structured settlement plan. This type of payment plan consists of sending the injured party a monthly or annual payment over a period of time. This type of settlement plan gave people the security of having income on a regular basis.

When a structured settlement payment plan is in place, the injured party will be able to receive the funds necessary to pay for their medical care. If the injured party is confined to a bed or even to a nursing home, the monthly payment from the structured settlement will alleviate the worries that the family may have about how to afford care for their loved one.

The decision to change from lump sum payments to structured settlement payments was not made without careful deliberation. Studies have shown that about 30% who received a lump sum payment due to an accident spent all of the money within two months. Further studies revealed that 90% of the people spent all of the money within five years.

For a lump sum payment to be beneficial for the injured party for future medical expenses it must be invested and administered over time. Since most people do not have experience in investing money, the injured party must hire a financial advisor to invest the money for them. When a huge sum of money is invested, the returns on the investment are taxable. In addition, when you hire a financial advisor you run the risk of getting the wrong person and having your money disappear due to theft or just plain mismanagement of the funds.

A personal injury structured settlement can be beneficial because it is tax free. The money is backed by a life insurance company and delivered to the injured party in annuities or smaller monthly or yearly payments. The reasons that personal injury structured settlements are beneficial are many. For example, if a victim dies and leaves behind minor children, the personal injury structured settlement payments can provide for food, housing and education for these minors.

So as you can see, personal injury structured settlements are a good thing. The money will be there if needed. The injured party and family members will not have to worry about financing future medical expenses. If you are ever injured in an accident and your attorney suggests structured settlements, it may be a good idea to take him up on this offer.