A structured settlement pays out money in installments instead of a single lump sum. If you win a settlement in a lawsuit, win the lottery, or get a large inheritance you can receive that money either as a lump sum or as structured payments. An insurance company provides regular income payments from a structured annuity to you under the terms of the structured settlement.

Why would you want a structured settlement rather than a lump sum settlement?

One advantage is that you ensure a regular source of income over a long period of time. If you are the type of person that would spend all your money right away, it makes sense to choose structured payments over a lump sum payment. The other main reason to choose structured settlement payments is tax advantages. By receiving structured settlement payments in lower amounts over time, you avoid the tax hit you would get on a lump sum settlement.

What are the disadvantages of structured settlements?

The terms of the structured settlement are fixed once they are made. For this reason it is important to negotiate the terms under the guidance of a good attorney. Settlement payment terms are flexible and can be structured to meet your specific needs.

Selling a Structured Settlement

If at some point you decide you need a lump sum of money instead of smaller payments over time, it is possible to sell a structured settlement. This would mean selling all your future payments to a structured settlements company or buyer in exchange for one lump sum. It is important to discuss your situation with a lawyer and tax specialist to figure out the best course of action for you.