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  • Writer's pictureRobert Schuerger II

Should You Choose a Structured Settlement in Nashville, Tennessee?

Whenever the discussion of how personal injury case proceedings work comes up, the talks often center around the accident, what happens after, and everything leading up to a settlement decision. However, what does the receipt of the settlement money look like? Will it be a lump sum payment or will there be some kind of interval payment style being used?


Does the plaintiff have a choice? If so, what should the choice be? These are essential concerns of someone who may have a personal injury matter on the horizon with some level of clarity needed.

To answer these questions, the information below will introduce the concept of structured settlement payments and the different considerations surrounding them.


What Are Structured Settlements?


Once the matter has reached its conclusion, an accident victim can get a lump sum settlement from the negligent party's insurance company, which is likely how most people envision settlement agreements going. However, there is also the structured settlement approach, which is an alternative.


The plaintiffs, instead of getting a lump sum payout up front, will instead receive payments over time. The first and most obvious benefit of this is that receiving money all at once can come with a series of complications that are pretty nice to avoid.


Additionally, going the route of periodic payments does allow the recipient to have a source of income for the duration of payment. This is especially great when certain recurring costs need to be covered.


When Does Such a Settlement Payment Agreement Come About?

When Does Such a Settlement Payment Agreement Come About?


As you can imagine, a settlement must occur for this option to even become available. Once that has happened though, the plaintiff can then request that the funds be paid as a structured settlement instead of a lump sum. The defendant can also come forward and make the offer.


However, it's not official just because one person would prefer it. Both parties must agree on the terms, after which the settlement will be submitted to the court to be approved. Once the judgment is signed, it becomes effective.


Why Are Structured Settlement Payments Beneficial?


As you can imagine, when you put structured settlement payments vs. lump sum payments, there are several ups and downs to think about when choosing the former. Here are some of the advantages of making this decision:

  • Income tax benefits can come with structured settlements. Under the US Internal Revenue Code, personal injury settlement money is classed as tax-free. Be that as it may, there are exceptions that can apply, which makes the whole thing taxable. Incremental payments would lessen the burden.

  • Since structured settlement annuity payments can be tailored, it becomes possible to match it with contingencies or future demands that may come up.

  • Structured settlement annuities don't have to be taken in isolation. They can be combined with a partial lump sum payment, which will help to meet financial obligations.

  • Since investment risks or market volatility have no bearing on a structured settlement payout, the plaintiff will comfortably continue to receive the agreed-upon amount as is.

  • Sometimes, people simply have bad financial practices. Therefore, if given a lot of money at once, they will be compelled to spend it irresponsibly. Structured settlement payouts can help such persons to make better choices.

  • Settlement funds handled in this way can be set up to last a lifetime, which is great in cases such as those where the plaintiff suffers from some kind of permanent disability.

  • The idea of structured payments could be the very thing that helps parties agree to a consensus if settlement negotiations are not going well.

What Are Some of the Drawbacks of Structured Settlements?


On the flip side, there are reasons why when considering lump sum or structured settlements, you may not want to go with the latter. Consider these disadvantages:

  • The ideas of inflation, recession, or unexpected economic changes can reduce the real value of the money that the defendant's insurance company pays over time.

  • After the agreement has been approved, there may be a desire to make changes to the terms that are in place. Unfortunately, this is very difficult to do after sign-off, which can be a huge problem if the plaintiff's financial situation changes, which would give rise to the need for the changes.

  • Structured settlement schedules and amounts don't change over time. While this is good for reasons such as receiving guaranteed payments, there is no concept of capital growth to be taken advantage of here.

  • Regardless of whether the settlement is paid as a lump sum or via a structured settlement, certain portions of the settlement may still be taxable. Examples include purely emotional damages, certain attorney fees, and punitive damages. This means that the extent to which there could be tax benefits for going this route would become largely diminished.

  • An insurance company could potentially become insolvent over time. This can present great concerns for the payment of future benefits as expected.

How Does the Structured Settlement System in a Personal Injury Claim Work?


As indicated before, the plaintiff and defendant must reach an agreement on the various terms that will go into the structured settlement agreement. These will include how much money is to be paid at what interval and for how long. Schuerger Shunnarah Trial Attorneys can also help with questions like What happens if a dog comes in my yard and my dog attacks it?


The onus will then be on the defendant to either make the payments as expected or to purchase an annuity from an insurance company that will then handle the payments.


Structured settlements as an option don't apply to all cases. It's a good idea to discuss with injury lawyers in Nashville TN if the option is available and if it is a recommended one. Some of the common types of cases that will allow for this option include:

  1. Medical malpractice

  2. Personal injury cases

  3. Workers compensation claims

  4. Vaccine injuries

  5. Discrimination

  6. Wrongful death

  7. Large-scale group molestation/sexual abuse

Deep Diving into the Settlement Agreement Process


This is a brief outline of what the structured settlement process will look like:

  1. The claim the plaintiff pursues against the defendant is settled

  2. Both parties reach an agreement on what compensation will be as a structured settlement

  3. As a part of the settlement agreement, the plaintiff will need to release the defendant from any further liability

  4. The defendant, either from existing resources or via an insurance company, will fund the settlement

  5. If the defendant purchases a life insurance company annuity, then it will take on the responsibility of making the payments.

Typically, the annuity purchase is the better way for both parties. As far as the plaintiff is concerned, this means not having to rely on the defendant being in a good financial position. The defendant benefits by not having this obligation looming over their head.


Payment Schedule


Depending on the payment needs of the plaintiff, it's possible to arrange structured settlements in a series of ways. Here are some of the common arrangements that will typically occur:

  1. Lump sum payment followed by periodic payments: This will usually be sought after if the victim has large medical bills or other substantial expenses. The total settlement will be divided among one huge payment followed by smaller payments on a schedule.

  2. Delayed payments: In this case, the plaintiffs will not want to start receiving payments immediately. There may be financial responsibilities to come that would necessitate this. The payments will start later in life.

  3. Increasing payments: The amount being paid over time may not be set at one rate. Instead, the payments may start small and get bigger over time.

  4. Decreasing payments: This is the reverse of the previous option, where the payments will start large and reduce over time.

  5. Extraordinary expenses: A structured settlement here will pay a specific amount of money on a schedule, with additional payments being allowed for extranormal expenses.

Timeline

What the timeline looks like will depend on several variables including what the arrangement was initially, if there's a death benefit to be paid to surviving loved ones, etc. It's not uncommon for these agreements to last for 10 years, 20 years, or even a lifetime.


Taxation Concerns

Typically, compensation for physical personal injury claims is tax-exempt. This will apply for physical injuries or sicknesses not deducted from the plaintiff's taxes, mental and emotional distress from these injuries, or lost property value if the settlement is equal to or less than the basis of the property.


Considerations That Are Essential in Payment Option Considerations


Your attorney will help you to decide which payout option suits you best. They can help answer questions such as can I see my personal injury file? Some of the considerations that will go into this include:

  • Money management skills and financial needs

  • Tax implications

  • Health conditions and life expectancy

  • Income sources


Seek the Guidance of an Experienced Personal Injury Lawyer in Nashville Today!

Seek the Guidance of an Experienced Personal Injury Lawyer in Nashville Today!


A structured settlement payment agreement may be used instead of a lump sum payment. This may be because of financial needs, money management concerns, etc.


It's in your best interest to lean on the advice of your attorney to decide how the payments are to be administered.


Remember that you need to engage with an attorney who will go to war for you as soon as possible. To schedule your free consultation after an accident, call Schuerger Shunnarah Trial Attorneys today!

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