Structured settlements have long been part of the legal system – America and Canada both introduced the concept to their legal system in the 70's many people who have won a sum of money will understand what such a settlement is. But just what is a structured settlement?

What is a Structured Settlement?

A structured settlement is a an amount of money that has been awarded (usually as part of a legal claim, such as a claim for personal injury). Instead of receiving the entire amount in one lump sum, which has usually been the case (and indeed the only method), by using a structured settlement the party receiving the money does so at regular intervals.

It is up to the party receiving the money to consider the payment schedule. It could be any length of time, but most common is monthly or annual instalments.

Structured settlements will vary wildly from settlement to settlement. This is simply because there are so many circumstances that vary between instances. All sorts of circumstances have a bearing – from the needs of the person receiving the money to the finances of the person/company/institution paying it.

An important factor that needs to be considered when looking at a structured settlement is that of inflation. If the payments are spread out over a length of time, if they were to stay the same, they would gradually become of less worth in 'real value'. This is something that needs to be addressed in the settlement.

All such settlements are enshrined in law. That is true of both sides, an important factor. One this is agreed you will never be able to change your mind again, even if you wanted to.

Why Have a Structured Settlement?

There are quite the variety of reasons to decide on a settlement. It is important that you consider all sides of a structured settlement before deciding on it.

Regular payments makes life easier. Whilst a lump sum is nice it is very easy to spend on nothing. You can far more easily manage a monthly income.

A structured settlement also helps give tax breaks. The smaller payments will attract less in tax payments than a lump sum would. So you get your hands on more of the financial settlement by having a structured settlement than you would by having a lump sum.

For some who, such as those who have been seriously injured, there can be a lot of monthly bills that have to be met. A structured settlement nicely meets those on a regular basis rather than eating into savings.

If it is a person or small company that is having to pay the settlement then it could well be that they are unable to afford to make the full amount payment. If that is true then they can arrange a structured settlement, or even have one forced on them by the courts.

Structured settlement - what is it? we answer that in more depth over at eFinanced - fresh source of financial information

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