Structured Settlement vs. Lump Sum Payment

If you’ve been injured in a medical malpractice situation, the chances of you receiving compensation for those injuries are high.  In fact, you may have already won your case.  It may come down to a choice on how you want to receive that compensation – structured settlement or lump sum.  Below, we’ll examine the differences and explore which option is a better one for the long-term.

Why More and More Individuals are Choosing Structured Settlements

Although your first instinct may be to take the lump sum, you should know that more and more individuals are choosing structured settlements.  There are many reasons that this is so, and many benefits you gain from choosing this option.  Probably the most important reason that some individuals choose a structured settlement is that it’s tax free income.  This means that you receive all of the payments – and none of it is taken for taxes.  If you should invest this money, the dividends and profits you make are not tax free, but the actual payment itself is.

Another advantage of choosing a structured settlement is that you typically end up receiving more than you would if you had taken the lump sum.  You can also usually request to receive an advance up front in order to pay large, pressing medical bills or for other reasons.  It’s an income that you will be guaranteed and can count on to make sure you’re taken care of for as long as the term of the payments.  One of the disadvantages is that once the structured settlement is set – there is no changing it, and that includes the amount you receive, when you receive it, etc.

What are the Benefits and Disadvantages of Lump Sum Payments?

One of the most obvious benefits of lump sum payments is that you receive all of your money up front.  This money can be used for investing, to pay your medical bills or purchase different things you need or want – it’s your money and you can use it the way you see fit.  This is really the only shining benefit of this kind of payment, because you will end up with much less than if you choose the structured settlement.

No matter what choice you make, you should discuss it with your attorney in order to determine which option will be best for you and your own unique situation.  Some individuals may actually benefit from choosing the lump sum payment, such as those with a short life expectancy because of the injuries they have received.  However, this is an extreme case.  Choosing what is best for your situation is the best option all around.