Injury Structured Settlement

Prior to 1982, a personal injury structured settlement was uncommon, underutilized, and often thought of as a way for unscrupulous people to bilk the unsuspecting out of millions. The damages in a personal injury lawsuit would usually be awarded in one lump sum. For the most part, the average person does not deal with large amounts of money on a regular basis; leaving them vulnerable to being taken advantage of. Perhaps the injured party would be fortunate enough to have a friend or relative capable of assisting in financial matters of this magnitude. However, in many cases there is not a trustworthy person with the right skills in an individual's lfe. So, perhaps a stranger is the answer. Although intimidating, that may be the safest thing to do. Wise financial counsel can help a person figure out what they should and should not do in order to keep the lion's share of the money and benefit from it. "Where no counsel is, the people fall: but in the multitude of counsellors there is safety." (Proverbs 11:14) Large sums of money can make our lives more convenient and less stressful or more careless and destructive. In the case of a lump sum settlement, the money must be budgeted, invested, and spent wisely. The concept of a personal injury structured settlement is one way to help people who face this situation.

If, in fact, a person is not accustomed to dealing with large amounts of money at one time, there is sufficient evidence to indicate that they will have a hard time with it. A large one time payment frequently causes quite a bit of stress to a person not accustomed to managing large sums of money. Time after time, people decry, "I can't believe they're broke already. If I got that kind of money, I would know exactly what to do with it." Though generously pontificated, it's not likely to bear out in reality. More often than not, visions of expensive cars, mansions, and never-ending parties flood the minds of awardees. After being awarded, the injured person is likely to spend the settlement money on the things they had been dreaming of having one day. Many, if not most, winners of millions of dollars spend it quickly and often end up in debt; before its all said and done. The same is true for the damages awarded in a personal injury claim; making the concept of a personal injury structured settlement even more compelling.

In a sweeping move to help people out who were stuck in this predicament, the Periodic Payment Settlement Act of 1982 was passed. This legislation made the personal injury structured settlement a common practice in lawsuit damage awards. Its purpose was to amend the U.S. tax code in support of the use of structured settlements as a payment option for personal injury claims. This legislation came about as a result of the fact that a majority of people being handed large lump sums, would meet poverty soon after the award. In injury cases, awardees are given money intended for long-term treatments, future surgeries, and equipment replacements. When the money was given in a lump sum, a great number of people were not able to properly budget and allocate the necessary funds in the areas needed; leaving them unable to care for themselves. Because of this legislation, it is now possible to negotiate an injury structured settlement payment plan as a more suitable recourse than a lump sum payout so that the injured party's long-term needs are taken care of. Also called, annuity plans, they are especially well suited for circumstances where incapacity may exist and/or long-term care will be required; or when a parent of a minor child is the injured party, leaving inadequate financial support, otherwise.

How these annuity plans work is that they begin by uncovering the extent of the injury and calculating the present day sum of how much money the responsible party must use to fund an annuity. The annuity is simply a contract between the responsible party and an insurance company. The responsible party makes a lump-sum payment or series of payments to the insurer. The insurance company agrees to make periodic payments to the injured party. The annuity will take care of the damages awarded the injured party for the term set within the agreement. That term could be one year or perhaps the individual's entire life. Used to fund a personal injury structured settlement, the annuity plan is an good way to protect a person's financial security for future. Once a good plan is in place, medical expenses are taken care of through the monthly or annual annuity. This alleviates worries about care and sustenance.

In addition to the damages awarded for a specific physical injury; there may also be pain and suffering, loss of income, and loss of consortium damages awarded as part of the settlement. All damages, except for punitive damages, are tax-free at both the Federal and State levels. Even though the overall amount of money may be substantial, annuity payments come in smaller increments. This is good news if a person does not already have a financial advisor they can trust. There are companies who specialize in converting personal injury structured settlement payments into lump sum payments. Admittedly, the cash amount these companies would be willing to pay will be less than the total amount to be received over time. An awardee may actually have a specific goal to achieve with the money. If the idea of owning a business was ever part of a future plan. The future could be now. Each person has their own choice to make. Depending upon whether you actually need the money for medical expenses, a college fund for a child, or it's a windfall, each payment option has its benefits. Everyone's circumstance is different. A lump sum windfall sounds really nice; but if not prepared most people are better off taking the personal injury structured settlement.