What is the difference between structured settlements and lump sum payments?

If you’ve been through a long legal battle and were recently awarded a structured settlement, you might feel a sense of relief. However, it’s important to understand the difference between a structured settlement and a lump sum. A structured settlement is an annuity that provides ongoing payments to you. Often, structured settlements are awarded to people who have been injured and can’t work as much as they did before their accident. The monthly payments serve as a replacement for their lost income for a set number of years. So, for example, you might win $400,000 and the defendant is required to pay you $40,000 every January for 10 years plus interest.

On the other hand, you might receive your settlement as a lump-sum payout, which means you receive one large amount of money all at once. In this scenario, you’re free to manage your award at your discretion and put your payout in investments that have a better rate of return.

Which is better, structured settlements or lump sum payments?

While the structured settlement option has many advantages—like guaranteed future income—it may not be what you really need. One downside of a structured settlement is that they cannot be renegotiated once an annuity contract is issued. If you find yourself in a position where you need a large sum of money to get out of debt or pay large medical bills and you’ve been awarded a structured settlement, the good news is that you can sell it for a lump sum.

Selling your structured settlement

If you choose to approach the secondary market to sell your structured settlement, you’ll find that you need to make a court appearance, where a judge will ensure this process is done legally.

To sell your structured settlement for a lump sum, you need to first find a service provider. Research companies that buy structured settlements and ask for referrals. Many attorneys know of reputable companies you can use, so start with them first.

Although Resolution Funding does not currently deal with structured settlements, we are knowledgeable about the process and would be happy to answer your questions. There are pros and cons to both and many factors to consider, such as your ability to budget effectively, tax issues, and your financial needs. If you have questions about structured settlements or lawsuit funding in general, call us at 855-529-2382. We would be happy to discuss your needs.