Sustaining an injury at work and gaining workers’ compensation claims mean that you could get a settlement. This settlement can either come as a structured settlement or a lump-sum payment.
It is important to understand the difference between the two, as this could greatly affect how you receive the payment from your settlement.
How do structured settlements work?
Cornell Law School defines a structured settlement. This differs from a lump sum payment, in which your employer or their insurer makes a single payment that ends with your case getting closed.
With a structured settlement, you will get multiple payments over an extended period of time instead. You can choose to receive all or a part of your settlement over a certain number of years, or even over your entire lifetime. You will likely get a large part of this settlement shortly after reaching this agreement. Then, you structure the remainder so that the defendant will pay out the rest over the following years in accordance with your agreement.
Who do structured settlements benefit?
Lump sums generally seem preferable to structured settlements in many cases. But there are some cases in which the opposite is true. First, if periodic payments help you from spending your money too quickly. Many who receive a lump sum will spend it too quickly and end up with nothing after a few years.
Second, you can save money on taxes this way. You have less money in your account with this, which generally makes for a lower tax obligation due to the dividends and interest that your benefits may gain. These are just two of the good reasons why you may want to pursue a structured settlement instead.