A structured settlement is a common tool used in personal injury law. When you reach the end of your personal injury case and win you will end up with a settlement. That is a certain amount of money intended to compensate you for your injuries and their long-term effects on you going forward. While it’s common to think of settlement in terms of a lump-sum payment, and that is often the most common form of settlement, there is another option. This other option takes the form of what is called a “structured settlement”, a concept that many personal injury litigants may not be familiar with.
What is a Structured Settlement?
A structured settlement is a settlement where you receive the payment for your injuries on a periodic basis. You can think of it as akin to having your settlement funds dispursed out to you over time like a paycheque you receive at set times.
How is a Structured Settlement Created?
A structured settlement is created when part of your personal injury settlement is held by a life insurance company that will provide you with periodic payments from the settlement over a set period of time.
What Are The Advantages of a Structured Settlement?
One of the key advantages is that they can preserve payments from different social support programs such as Alberta Income for the Severely Handicapped (AISH) or other programs which have income/asset thresholds that may disentitle you to receive these benefits. A structured settlement enables you to get around this as you are not the one holding the bulk of the funds received in the settlement, rather it is the insurance company who is providing you with a periodic payment out of the settlement. This keeps your assets/income below a certain level enabling you to continue to qualify for government assistance and in effect resulting in you being able to draw on more sources of funds in the long term. Structured settlement payments can also often continue on a tax-free basis to your family after your death.
Structured settlements also often allow for a high degree of customization. For example, you can select the period for which you want to receive payments. You can also often select to receive lower payments initially then higher payments later on if you foresee you need additional funds later in life.
Are There Any Disadvantages to Proceeding by Way of Structured Settlement?
The key disadvantage is that there is a lack of flexibility once the plaintiff agrees to a structured settlement. You cannot go back on the arrangement so to speak, which is why it is important to give it serious consideration before you agree to the terms.
Plaintiffs with immediate financial needs may wish to consider simply proceeding by way of a lump sum.
When Should a Structured Settlement be Thought About?
A structured settlement is appropriate to consider in many instances, the key one being where the injured party has been drawing on government programs such as AISH to receive social assistance. Other areas where a client may wish to consider this can include where the client suffers issues relating to poor spending habits. Trickling the money out over time enables the client to continue to have funds into the future where they otherwise may have difficulty exercising the restraint needed to ensure that the funds will last.
Do I Have to Pay for a Structured Settlement?
Typically, the way structured settlements work is that the insurance company will invest the principal amount and use that as a method to generate income, as such you generally will not be charged or have money deducted from your settlement.
If I am Interested in a Structured Settlement What Should I Do?
You should bring this up with your lawyer and ask about it. The precedent-setting injury lawyers at James H. Brown & Associates are more than happy to answer any questions you may have about a structured settlement for your case.
If you have been injured in an accident and need representation call us today! 780-428-0088! Our lawyers are standing by for your free consultation!
