The Definition of Structured Settlements and Their Benefits | Get Financial Freedom Tips | Transform Your Financial Future


Saturday, February 4, 2012

The Definition of Structured Settlements and Their Benefits

If you won money from a lottery payout or court case, consider getting a structured settlement if you don’t already have one. If you don’t need a large sum of money right away, these annuity payments can be the perfect financial plan to keep you solvent and in good monetary shape. Of course, if you do have a need for a lump sum, it’s also possible to get cash for structured settlement, too.

Read on to learn three benefits of annuity payments for your settlement and how you can put your periodic payments to good use.

1. Tax-Free Earnings

One thing that a lump sum often carries with it is a hefty tax levy. Especially if you are planning on investing your award, you may end up paying quite a lot at the end of the fiscal year when it comes to dividends earned on your investment. This is where you may lose some of the money you’re trying to save and grow for the future.

The Definition of Structured Settlements and Their Benefits

On the other hand, annual, monthly or weekly payments issued for a settlement can be easier to manage in terms of taxes. While it’s true that you aren’t initially taxed on settlement earnings, whether they are in payment form or a lump sum, payments can make the tax burden less or nonexistent for that source of income in the long run.

If you use your payments to pay for expenses like your monthly rent, mortgage payments or other necessities, you won’t be taxed on it. Likewise, if you do end up investing it a bit at a time, the dividends will be smaller each year, and thus, less tax will be taken out.

2. Easy Budgeting

Another benefit of payments is the fact that they can make it easier to budget. When you receive a lump sum, it may be difficult to manage it in terms of day-to-day and year-to-year expenses. This makes it easier to spend the money needlessly.

However, regular payments of a particular, even amount can actually make creating a budget easier. If you know exactly how much money you’re getting each month or week, you can figure out what the sum will go toward. Maybe you want to refinance your mortgage to shorten the term or lower the interest rate. Paying off debt is a great plan when you receive payments because it can help you save thousands of dollars in interest in the long run.

3. Good Option for Several Life Circumstances

Many life circumstances lend themselves well to periodic payments, too. One of these is early retirement. Another possibility is using this money toward education or home improvements. There are lots of smart uses for settlement payments. Go online today to learn about turning settlement money into structured payments.


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  2. Make sure you understand exactly what you are getting and when you are getting it when it comes to selling your structured settlement. Companies that promise cash now are probably not being totally honest as to when someone actually receives their lump sum payment.