So, you've gotten a settlement from a lawsuit. You probably rejoiced when you found out - only to have your happiness deflated when you found out you wouldn't be getting all of the money at once. In a lot of cases, settlements in lawsuits are structured settlements. That means the prevailing party will receive it in installments instead of one lump sum. While that can be great, since it gives you a regular income for a certain amount of time, it doesn't always work for everyone. That is where structured settlement buyouts come in. Here are three advantages to getting a structured settlement buyout versus installment payments.
1. You get a lump sum payment now.
If you were injured in an accident and haven't been able to work, you likely have bills piling up that need to be paid. Getting the settlement in installments is not very helpful in a situation where you are facing losing your home because it will likely take more than one installment to get caught up. Going with a structured settlement buyout can give you the money you need to keep your home and car and to keep you financially secure until you are able to work again.
2. Your settlement buyout can be exempt from taxes.
There can be a lot of confusion when it comes to structured settlements and taxes. If you continue to receive payment in installments, that income is exempt from taxes as long as it doesn't compensate for lost wages. Many people mistakenly believe that selling their structured settlement payments will cause them to incur taxes on the amount they receive in the lump sum. However, any amount of the lump sum that doesn't include payment for lost wages is still considered tax-exempt.
3. There's no need to worry about lost payments as a result of moving or bank account closure.
If you get structured settlement payments, whether you get a physical check or the installment is put into your bank account by direct deposit, you have to keep your contact information updated. That means, if you move, you need to contact the company handling your settlement payments and give them your new address. And, if the move occurs shortly before the time your check would be sent, there is no guarantee it can be sent to your new address.
With direct deposit of settlement installments, you have to make sure to either keep the bank account associated with the payments open or update your bank information quickly. If you fail to do so, your installment payment can take a long time to receive, as it will have to be sent back to the company paying your installments. In many cases, once a direct deposit is sent back, they decide to send a paper check instead. So, that can further increase your wait time.