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Understanding Your Payout: What Is a Structured Settlement?

Pursing legal compensation is a viable option in a wide array of scenarios. In fact, many college students are suing their universities for tuition they’ve lost due to the COVID-19 outbreak.

When you settle on compensation, though, you don’t necessarily get it all at one time. You may receive it through a structured settlement instead.

So, what is a structured settlement? Don’t worry, we’ve got you covered.

Let’s take a look at everything you need to know.

So… What Is a Structured Settlement?

As previously mentioned, those who settle for compensation don’t always receive a lump sum. A structured settlement is used to pay for the plaintiff through a series of smaller payments until the entire amount has been satisfied.

It’s important to note that the payment of a structured settlement often does not occur when a lawsuit is resolved in court. This is a method that is frequently used in exchange for the plaintiff dropping the lawsuit entirely. 

It is possible, though, for a case to go to trial and for the defendant to have to pay a structured settlement to the plaintiff.

How Does The Process Work?

Although the process may seem complicated at first, it’s relatively simple. 

It begins when a plaintiff sues a defendant as a method for seeking compensation. Personal injury, wrongful death, etc. are common motivations behind filing a lawsuit.

In order to avoid the costs and inconvenience associated with going to trial, both parties can attempt to reach a reasonable conclusion regarding compensation. This part of the process is almost always entirely communicated through the legal professionals representing each party.

A consultant who is familiar with the context of the circumstances of the lawsuit can also be used to help determine a suitable amount.

Whatever specific number both parties agree upon, the settlement is then created. This will detail the total amount, the payment term, the amount of each payment, etc.  

What Else Do I Need to Know?

Although the plaintiff will receive a payment each month from the defendant, income from a structured settlement is not taxed. This is even true if the settlement earns interest as time goes on.

Similarly, this income does not have any impact on someone’s capability to receive Social Security benefits, Medicaid, etc.

There’s also a notable amount of freedom when it comes to determining the length of the payment. You’re also able to draft an agreement that declares certain intervals within the payment period will require a larger or smaller amount than normal.

You can learn more about the common terms of structured settlements here.

Understanding Structured Settlements Can Seem Difficult

But it doesn’t have to be.

With the above information about ‘what is a structured settlement’ in mind, you’ll be well on your way toward becoming fully aware of the terms you’re dealing with.

Want to learn more tips that can help you out in the future? Be sure to check out the rest of our blog.

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