4 Things To Keep In Mind About Structured Settlement

Structured Settlement

A structured settlement is an arrangement made with a person or company who has been injured and awarded financial compensation through a lawsuit. The injured person agrees to receive the money in periodic payments instead of one large sum. It can be beneficial for several reasons: it allows the injured person to receive cash over time, which can help with long-term care; it protects the injured person from having all of the money taken at once, which could leave them unable to pay bills or live comfortably; and it guarantees that the injured person will have some income even if they are unable to work due to their injury. If you consider accepting a structured settlement, there are several things you should keep in mind.

Make Sure You Understand the Terms of the Settlement

The first step is to make sure you understand what you agree to. Structured settlements typically have a set number of payments, and there may be penalties for missed or late fees. You should also be aware of any taxes owed on the income from the settlement.

It’s essential to understand the terms of your settlement to make an informed decision about whether it makes sense for you or not. If parts of the agreement don’t seem fair, ask questions until everything is clear and then decide whether this type of payment arrangement will work best in your situation.

Make Sure You Have a Plan for How to Use the Money

It’s not enough to receive the money in periodic payments – you need to plan what you will do with it. If you don’t need the money right away, you can invest it and let it grow over time. However, if you are injured and unable to work, you may need to use some of the money right away for living expenses. It would help if you had a plan in place so you don’t spend all of your money on immediate needs without thinking ahead about what will happen when those payments stop coming in.

If possible, it would be best if the structured settlement included an option to get some of the money in a lump sum if you need it. It can help you avoid taking out a loan or borrowing from family and friends when you need cash quickly.

Understand The Tax Implications of Your Settlement

A structured settlement can be a great way to receive money over time, but there are some essential things you should know about taxes before accepting one. The Internal Revenue Service (IRS) considers any amount paid out as part of a lawsuit or insurance policy claim to be taxable income; however, there are some exceptions to this general rule.

If you receive compensation for physical injury or sickness, the amount of your settlement will not be taxable as long as it is less than a particular amount. Only the portion above these limits will be taxed at your regular income tax rate if it’s more than that.

If you receive a structured settlement for something other than physical injury or sickness, like emotional distress, the entire amount will be considered taxable income.

Consider The Pros and Cons of a Structured Settlement Company

There are several things to think about when deciding whether or not to accept a structured settlement. On the plus side, they can provide you with a steady income over time, which can be helpful if you are injured and unable to work. They can also protect you from having all of your money taken at once by someone who might try to sue you for negligence or another claim related to your injury.

On the other hand, structured settlements can be costly because of their fees and tax implications. Also, if something unexpected happens, like an illness that requires expensive medical treatment or a job loss, it may not be easy to get access to the money you need right away because of how these settlements are set up.

There may also be restrictions on investments one can make with their money, which means it could sit idle in an account earning little interest. At the same time, inflation continues its upward trajectory over time.


We have discussed a structured settlement, how it works, and why you might want to consider one. By understanding the pros and cons of structured settlements, you can make an informed decision about whether or not this type of agreement will work for your situation.