Understanding Structured Settlements: Long-Term Financial Security with Tax Benefits

Structured settlements are a popular option for individuals who have received a settlement from a personal injury, workers’ compensation, or wrongful death lawsuit. These settlements are designed to create long-term financial security for the claimant by providing a stream of payments over time. In this blog, we will explore what structured settlements are and how they can provide long-term financial security with tax benefits.

What is a Structured Settlement?

A structured settlement is a financial arrangement that provides a stream of payments to the claimant over time. Structured settlements are typically used in personal injury cases or wrongful death lawsuits, where the claimant has received a settlement or judgment award. Structured settlements can also be used to settle workers’ compensation claims. Rather than receiving a lump sum payment, the claimant receives a series of payments over a period. Structured settlements often use a fixed annuity, which is a financial product that provides a guaranteed¹ stream of payments over time. The payments are made monthly, semi-annually, or annually, depending on the specific terms of the settlement agreement. Payments can also be made as future lump sums.

Advantages of Structured Settlements

Structured settlements offer several advantages over cash lump sum payments. One of the main advantages is that structured settlements provide long-term financial security to the claimant. Rather than receiving a lump sum payment, which may be spent quickly, structured settlements provide a reliable income source that can help claimants manage their ongoing expenses. Structured settlements also offer tax benefits to the claimant. Structured settlements for personal physical injury cases are income tax-free. This means that the claimant does not have to pay federal or state income tax on the settlement payments they receive, including growth. Structured settlements for non-physical injury cases are taxable, but the claimant can use a structured settlement to spread out their tax liability over time.

Another advantage of structured settlements is that they provide a level of certainty to the claimant. Rather than worrying about how to manage a large lump sum payment, the claimant can rely on a steady stream of payments to meet their ongoing financial needs.

Sage Settlement Consulting & Structured Settlements

Sage Settlement Consulting is a leading provider of structured settlement services to individuals and businesses across the country. Our experienced team can help you understand the advantages of structured settlements and provide guidance on how to structure your settlement to maximize your financial benefit. We work closely with our clients to understand their unique financial needs and develop a structured settlement plan that meets those needs. Whether you are receiving a tax-free or taxable structured settlement, we can help you navigate the complex rules and ensure that you receive the maximum financial benefit from your settlement.

Conclusion

Structured settlements provide a reliable income source that can help claimants manage their ongoing financial needs. These settlement vehicles offer tax benefits and provide long-term financial security to the claimant. If you are considering a structured settlement, the experienced team at Sage Settlement Consulting can help you understand the advantages of these settlements and provide guidance on how to structure your settlement to maximize your financial benefit.

At Sage Settlement Consulting, we believe that structured settlements offer a unique combination of financial security and tax benefits that can help claimants achieve their long-term financial goals.Contact us today to learn more about how we can assist you with your structured settlement.