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Structured settlement vs. lump sum

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Updated: 4/13/2007 6:36 pm
If you're awarded damages in a lawsuit, you may be offered the choice of receiving the money in the form of a structured settlement or as a lump sum. There are advantages and disadvantages to both forms of payment, so it can be difficult to decide which one is best. Structured settlements generally consist of an up-front payment to settle medical bills and other immediate expenses. This is followed by more structured payments either over a specified number of years or for the duration of your lifetime. The advantages of a structured settlement include the security of having compensation for your long-term needs as well as the inclusion of cost-of-living adjustments. Structured settlements can also be designed to provide larger sums of money periodically, for example to cover a child's college tuition or to meet special needs when you reach retirement age. Another advantage of a structured settlement is that the payments are generally not taxed, unlike any income you may earn from investing a lump-sum payment. Disadvantages of a structured settlement include the fact that the payments may cease at a specified time, or on your death. If you're offered the choice of a structured settlement or a lump-sum payment, your attorney can assist you in weighing the pros and cons of each alternative.
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