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When an injured party wins a settlement as the result of a lawsuit, it doesn’t necessarily mean their struggles are over. How to responsibly budget and spend their new settlement monies poses a challenge, but—depending on the type of case and the plaintiff’s individual circumstances—a structured settlement may be the answer. What is a structured settlement? In today’s blog post, we provide a full overview to help you learn more about these financial plans, how they work, and how they can benefit you.

What is a structured settlement?

A structured settlement is a tool for parties who receive a settlement from personal injury, workers compensation, or wrongful death lawsuits. It allows the injured party to receive their settlement award as a series of payments over time rather than as a lump sum given to them all at once. Structured settlements protect injured parties from irresponsible financial decisions that may waste the settlement sum, while also enabling them to plan strategically for their future.

How does it work?

With a structured settlement, you have the flexibility to create a solution that works best for you. Proper settlement planning will provide for both you and your family’s immediate and future needs. You can take a portion of your settlement up front for current expenses, or you can set some or all of it aside to cover later expenses. Depending on the total of your settlement, you can divide it as a monthly or yearly income, set amounts aside for large expenses like a new car or mortgage, or delay payments until retirement. You want to design your structured settlement payouts to work for you and your family’s specific needs.

Benefits of a structured settlement

Receiving your compensation as a structured settlement has many benefits. First and foremost, this process takes away the stress of having to maintain and budget the large lump sum you would otherwise receive. This offers a great way to plan for future life expenses, such as college tuition or retirement. Payments from structured settlements are also entirely tax free—lump sum cash settlements, in contrast, come with taxable interest. These payments also create a guaranteed, long-term income, which can make it easier to provide for you and your family now and down the road.