Congratulations on winning your civil suit! Now there is still more planning and work ahead necessary for getting the most out of your payments. It is smart to start by considering a structured settlement.
When settling for a large sum of money, it is often best to receive payments in installments over time as opposed to one big lump sum. These payments can be set up in any way the parties choose. They can payout in annual installments over a number of years, for example, pay you in one big sum every few years, or in some cases monthly.
By choosing a structured settlement like this, you can significantly reduce any tax obligations related to your payments–they are usually tax free! However, some people feel trapped by the terms after a while, so it is important to be as confident about your payment terms beforehand as much as possible.
Before you agree to your payment terms, get organized. Know all your options. Be sure you learn all the terms of your settlement, including its strengths and weaknesses, and determine how these terms fit into your life. Making a pros and cons list can help you visualize these characteristics. Once you agree to your payment terms, you won’t be able to change them at a later date.
Without warning, medical hardships or other unforeseen life events may make it impossible to continue waiting for structured payments.Â In such a financial emergency, you may need your money immediately. At that time, selling your structured settlement is a viable way to get the lump sum of money you need right away. It is much better than borrowing from a bank or credit card, cashing out your 401K or taking out a second mortgage. It’s usually a tax-free transaction, too, one with no hidden costs that won’t add to any pre-existing debt.
By selling your structured settlement for one big sum, you may have to modify long-term plans. If you’re used to receiving monthly payments, retaining some of these will give you a smoother transition into your new budget. Whether it is best for you to sell some of your structured payments or all of them depends on your individual case.
It is always wise to figure out how keep your earnings organized by creating a financial plan. Definitely devise this before a big lump sum arrives and before agreeing to the original settlement terms. The more developed and detailed you make your monthly budget, the better. Continue to revise this plan over time to get the most out of your settlement.