Each year thousands of people are injured in car accidents, slip and fall accidents, or due to someone else's negligence. When one of these personal injuries occurs, most people instantly follow a lawsuit against the negligent party to get compensation for their injuries.
Financial Settlement for Injuries
In most cases, a personal injury case is settled out of court in the form of a financial settlement. However, personal injury lawsuits aren't always settled out of court. Drug lawsuits commonly go to court, although your run of the mill personal injury case probably won't end up being decided by a jury.
Structured Settlements
In most cases, once a settlement is reached, the agreeing parties agree to a structured settlement to pay the injured party their fair compensation. A structured settlement can be advantageous to the injured party for several reasons.
For example, you can decide not to take payments for ten or fifteen years and use the structured settlement as a way to finance your retirement. Keep in mind, you will need to pay taxes on the interest earned and any money made from investing your settlement if you do end up investing your settlement.
To arrange payment for the injured party, the defendant either sets up an annuity or sends its payment obligation to a third party. Generally speaking, it takes around 45 days for the plaintiff to start receiving payments from the structured settlement, although this depends on how your settlement is set up.
Getting Settlement Cash Now
For many people, structured settlements are both good thing and bad thing. On one hand, a structured settlement provides income over a course of a long period of time, which can stabilize the financial situation of a plaintiff.
On the other hand, many people have huge medical bills, which continue to pile up. If the medical bills are not paid in time, a plaintiff's credit can be ruined for life. In some cases, the plaintiff may have lost his or her job as well, which makes the need for money now even greater.
Due to the negative aspects to structured settlements, many people opt to get cash for settlement payments. Many financial services offer to buy a portion or all of a structured settlement and instead offer you a lump sum up front. Other times, a company might just offer a cash advance to give you some spare cash before your next settlement payment comes. You've probably seen the commercials for these companies by now as they are all over TV and Internet advertisements.
To receive cash for settlement payments, a special courting hearing must be held. Before any portion of the annuity or structured settlement is bought out, a judge must approve it. Some states are notoriously strict for disapproving structured settlement buyouts but as long as there is a legitimate reason for needing the cash now, a judge will normally approve the buyout.
Advantages and Disadvantages of Selling a Structured Settlement
If you're planning on selling a portion or all of your structured settlement, you should know the advantages and disadvantages.
Advantages
- You'll receive the cash you desperately need to pay bills.
- You'll pay less in taxes due to reduced interest earnings.
- You can take off the financial stress of living paycheck to paycheck.
Disadvantages
- You'll receive less money than you otherwise would if you waited for the whole settlement to be paid out.
- You'll earn less in interest and from good investments.
- Once you receive the lump sum, you will not receive another dime from the settlement.
In reality, the only way to determine whether or not you should get cash for your annuity is by looking at your financial situation. An annuity can set you up for life if you make some wise investments but at the same time you can lose money from investing as well.
Likewise, if you take cash for your settlement now, you're going to lose out of money you would otherwise receive if you waited the settlement out.
In the end, you'll need to do what is best for you and your family. For some people it might be getting cash now. For you, it could be completely opposite.
