In a structured settlement, you receive your benefits in a staggered manner. In other words, you would get the payment assigned to you over a certain time period. This method works if you would like to have access to funds at different stages of life and think you, individually, may not be able to wisely invest a lump sum amount. With a lump sum settlement, you are given all your claim money as a one-time payment. This method is good if you require your entire funds immediately or if you have a better investment plan than a structured settlement can provide.
It is important to note that not everyone is entitled to receive a structured settlement. They are accessible only to those who receive money because of a physical injury. Another aspect that one has to keep in mind is that in order to get structured insurance settlements, the awarded person should clearly state his or her desire for such settlement at the time of settlement agreement.
A structured settlement is a good way to receive tax 鈥 free payments spread over a period of time. When you are awarded a settlement you need not take the entire amount at the time of settlement, you do have a second option. You can set up a plan where in you are paid a limited amount of cash in the beginning with the remaining amount paid in installments over a decided time period. The future payments can be made monthly, quarterly, or yearly. By following this plan, you would be able to save a substantial amount of tax.
Generally, you can expect to save anything between 25% and 35% in state and federal taxes depending upon your state of residence and the nature of your settlement. However, to receive the tax break, by law you are required to "fix and determine" the structure of payment at the time of the settlement, which can not be altered at a later time.
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