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Court cases last between minutes and months, though some take up to several years before they are settled. This may seem like an eternity for the victims, but nothing beats the feeling of winning a lawsuit, especially when money is involved.
However, you do not always have to settle everything in court. There are several ways to solve disputes without going through the courts. You can employ arbitration, negotiation, and minitrials, among other alternative dispute resolution (ADR) methods.
ADR methods are great if you want to save time and money rather than going through the court process. This mainly includes hearings, appeals, and possibly even investigations. Also, most people find ADR techniques less stressful. However, the most crucial bit is settling the dispute and resolving the conflict.
Statistics show that up to 95% of pending lawsuits end in pre-trial settlements. This is common for cases with clear-cut winners and losers, like personal injury cases and product liability lawsuits. Therefore, if your case is that straightforward, you can entice your opponent to settle for a reasonable amount.
People face the challenge of deciding whether to go for structured or lump settlements. A structured settlement is a financial arrangement where a party gets compensation over an extended period.
Parties often consider structured settlements in a wide range of cases. These include employment law cases, civil rights cases, personal injuries, and medical malpractice cases. People’s circumstances vary, but they should always consider a structured settlement.
You need to know the pros and cons of structured settlements to enable you to make better decisions. However, in some cases, your situation may limit your ability to accept structured settlements.
Benefits of Choosing Structured Settlements
They Offer Financial Stability
Structured settlements provide a predictable stream of income over a specified period. This predictability can provide financial stability and security. You know that additional funds are coming your way at the end of a specified period.
These funds can be life-changing for individuals who have suffered a significant injury or loss. It will even help reduce the amount of financial pressure they experience. They can channel the money towards treatment and maintaining their lifestyle.
They Create Financial Discipline
Most people need more financial discipline to put any lump sum payment they get into good use. According to a survey, 59% of the participants were confident in their financial discipline. However, further interrogation into their savings accounts and lifestyle revealed otherwise.
Many Americans lack the financial discipline to save and invest, so a structured settlement is a better approach. Otherwise, a plaintiff will often squander the lump sum they get from settlements. This is because most have yet to encounter such sums of money, so they get carried away.
A structured settlement will ensure you spend only some of your benefits in one go. The plan also reduces the risk of falling into financial hardship.
They Offer Tax Benefits
Governments across the world generate money for their expenditure through taxes. In most cases, you find that settlements are also taxed. It is because they are considered a source of income. Therefore, your lump sum payment comes with a tax obligation.
However, there are exceptions for cases where the settlements are towards damages for physical injuries, among others. You should note that you are guaranteed tax benefits if you decide to get a structured settlement over a lump settlement.
First, structured payments are often tax-free for the recipient; therefore, they do not come with a tax obligation. Also, expenses related to a structured settlement, such as attorney’s fees and court costs, may be tax-deductible. It will help reduce your tax obligation for the year.
You will also benefit from settlements structured as annuities. The annuity payments have lower taxes, among other tax benefits. Therefore, a structured settlement provides multiple tax benefits and reduces your overall tax.
They are safe From Creditors.
You may have to file for bankruptcy for one reason or the other. It often happens when your business fails, so you cannot pay off your debts. Chapter 7 bankruptcy relieves a person or organization of the obligation to pay their debtors. However, their assets are liquidated and distributed to the debtors by a trustee.
You do not have to worry about losing your settlement reward in such a situation. Because you do not own the settlement annuity, the money cannot be claimed. Therefore, a structured settlement protects your reward when you are in debt.
They can Help Beat Inflation.
Currently, most countries in the world are on the verge of an economic meltdown. It has seen a rise in inflation rates all over. Knowing that you have funds that you can access on a future date can be unsettling because the amount will be worth less.
However, structured settlements can be structured in several ways to beat inflation. It includes inflation-indexed annuities, which help maintain the value of the settlement. You can also use inflation-protected investment vehicles like treasury inflation-protected securities (TIPS).
These are low-risk ways of ensuring you get your settlement and beat the rising inflation.
Shortcomings of Structures Settlements
Despite the benefits, some factors may hinder you from picking structured settlements over lump sum payments. Some things you need to note about structured settlements include the following:
- Lack of flexibility- Structured settlements can limit recipients’ access to funds for unexpected expenses or emergencies.
- Limited access to funds-Structured settlements limits your ability to use the funds for major expenses. It may include buying a home, starting a business, or paying for education.
- Lower overall value- Structured settlements may provide a lower overall. It occurs if the recipient can invest the lump sum at a higher rate of return elsewhere.
Conclusion
There are multiple ways to solve conflict outside the court. If you have a clear-cut case, you can save time and money taking a settlement. If you can, go for a structured settlement because of the benefits.
Structured settlements give you tax benefits, financial discipline, and stability. Structured settlements are also safe from creditors. Structured settlements help you enjoy your reward longer and reduce the risk of squandering your money. Therefore, if your situation allows, choose structured settlements over lump sums.
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