At the conclusion of a personal injury lawsuit, not every plaintiff wins a lump sum of money. Some of them ask to receive a structured settlement.
What is a structured settlement?
A structured settlement arranges for the plaintiff to receive all or part of the awarded compensation in payments that get delivered over a set period of time. An insurance company holds whatever part of the compensation has not been given to the plaintiff.
Benefits linked to structured settlements
The money that has been awarded to the plaintiff stays available to that same plaintiff for a longer period of time. Not all plaintiffs have the sort of knowledge and experience that allows them to invest a lump sum of funds wisely. Investments that yield dividends or interest must be taxed. There is no tax on money from a structured settlement. There is an increased security as the plaintiff knows when a payment should arrive.
Drawbacks associated with structured settlements
The money not given to the plaintiff would need to get placed with a highly rated insurance firm. Otherwise, that firm might go bankrupt, which would destroy the plaintiff’s source of funds. The structuring of a settlement works best when the plaintiff has received a huge quantity of funds. Plaintiffs that have received one of the smaller settlements do not derive great benefit from delaying their access to that small amount of money.
The structuring of payments does not match with the main purpose of the legal system’s goal. That goal is this: Make the plaintiff “whole” again. Structured payments tend to make the plaintiff “whole” piece by piece. Not all plaintiffs elect to go with that approach.
Possession of money does not guarantee the ability to handle that same amount of money.
If a younger person were to receive a windfall, he or she might not understand how to use those funds in the smartest fashion. By the same token, he or she might get all sorts of advice. He or she might not have learned about all the ways that an American can invest wisely. At the same time, friends might hope to get some of that pool of cash.
The facts mentioned in the above paragraphs help to underscore the factors that have triggered the creation of structured settlements. A good lawyer might steer a client towards one or the other of the 2 different systems. Of course, no injury lawyer in Kitchener can anticipate what desires might tempt a given client at some point in the future. Hence, lawyers let their clients decide on the form that they want their compensation to take. Lawyers do want their consignment fee.