What is a structured settlement?

A structured settlement is a financial vehicle through which money is paid out in installments rather than in one single lump sum. If you're involved in a Tampa car accident with injuries that resulted in a significant settlement, your Tampa car accident lawyer will discuss structured settlements with you in detail.

A structured settlement will often be created through the purchase of one or more annuities. These annuities are often bought through insurance companies that guarantee future payments to you. When the payments begin and how much is paid out at each installment is flexible and something that is usually determined when the structured settlement is established. For example, a structured settlement can be paid in annual installments over number of years or perhaps won’t begin making payments to you for several years.

Why would somebody want their settlement monies from their Tampa auto accident paid out through a structured settlement rather than in a lump sum? First, you should know that monies that you receive as a result of a personal injury claim such as a car accident Tampa are not currently taxable by the federal government. Having said that, one of the significant reasons a personal injury client may choose a structured settlement are the tax benefits.

As discussed, personal injury settlement monies are not taxable. But if you were to take this money and put it into stocks or bonds for example, any monies made from the sale of the stocks or interest paid on the bonds is taxable. But in a properly established structured settlement, you are not taxed on the money that is paid out to you.

It is the case that many people who receive money from Tampa car accidents find that they have lost all the money they received from the settlement within five years. This happens for a number of reasons including poor financial planning skills, bad investment decisions, your family members making requests to borrow money or purchases that give short term gratification but leave you without anything worthwhile.

When clients receive significant settlement monies from their Tampa auto accidents it’s because they will have to endure a lifetime of pain and may require additional future surgeries. Having to continue living with the pain and having lost to poor decisions the settlement monies to provide some type of compensation for that pain can be very discouraging.

A structured settlement can protect the person injured in a Tampa car accident from wasting their settlement monies. It can make sure that the money is there when necessary to pay for future care or needs. In this way, a structured settlement can protect an injured person from themselves. Many people are simply not good with money, while others, especially those who never had access to money, can't say no to relatives who want to take advantage of the sudden lump sum settlement. People are often very surprised to learn that even rather large settlements can be rapidly exhausted.

There are other issues to consider when making a decision whether a structured settlement is appropriate for you. In situations where an injured person is severely disabled as a result of their Tampa car accident for example, there will often be some type of government benefits that they will be entitled to through either Social Security, Medicaid or Medicare. They may receive these benefits for a short period of time of in some cases for the rest of their lives. In some cases, such public assistance may not be available or may be taken away when the person injured in a car accident Tampa receives a large settlement. Therefore, it may become essential to put the settlement money into a structure. The law allows someone that places money into a structured settlement to continue to receive public assistance under Medicare, Medicaid or Social Security even while enjoying the benefits of the periodic payments.

Before you can make a decision whether a structured settlement is right for you, you must consider several disadvantages of a structured settlement in a personal injury, medical malpractice or Tampa car accident case. One disadvantage of a structured settlement is that the company you choose to purchase a structured settlement with invests the money in very conservative investments. This is done in part because the company guarantees the payment of monies to you over a period of time and conservative investments are less subject to volatility and loss of principal. As a result, the amount of interest you receive from these investments may be less than you feel you would be able to earn if you invested the money yourself and then had to pay tax on that earned money.

Another possible disadvantage to choosing a structured settlement for your Tampa auto accident or other personal injury matter is that once choose a structured settlement is very difficult to undo your decision. For the most part, you will be locked into the structure or may have to suffer significant penalties to get out of it. This may make some purchasers of structured settlements for their Tampa car accident settlement monies feel trapped. For example, they may at some point wish to purchase a home or make some other large financial decision only to discover that they can’t because all the money they put into the structure is tied up. Before purchasing the structure with your auto accident settlement monies you should consider whether it is likely that such a large purchase will be made in the future. If you realize that such a purchase is likely, you might choose to place only a part of the settlement monies from a Tampa car accident or medical malpractice case into the purchase of the structure leaving money aside for the purchase.

Now in the event of an emergency or significant life change, it may be possible for you to sell the structured settlement which would give you some flexibility. These companies would give you a lump sum amount for your structured settlement and the company would begin receiving the periodic payments rather than you. But the companies that you would sell a structured settlement to are in the business of making a profit. Therefore, they will not be offering you the best price for your structure, and you'll find that it could be very expensive to sell the structure to one of these companies.

In addition, when purchasing a structured settlement is important that your Tampa auto accident law firm help you to locate a reputable companies. When buying a structured settlement product, as with any significant purchase, you'll need to be careful so that you receive the best rates and terms and are not taken advantage of. Structured settlements usually are considered to be an insurance product called annuities. Annuities are highly profitable investment vehicles for insurance companies and they often generate for their salespeople very large commissions. It will be important that you make sure that the commissions charged in your purchase of a structured settlement for your Tampa car accident injury settlement monies are within standard limits. Otherwise, the commissions can consume and inappropriate amount of the principal you have to purchase the structured settlement and thereby reduce the amounts you will be paid out. Sometimes the defendant’s insurance company will recommend a structured settlement company to you or your attorney. But be careful, because the structured settlement company might be offering the insurance defense firm a rebate. If that happens, it means that the defendant’s insurance company ends up paying less than the amount agreed upon for the injuries you sustained in your Tampa car accident. It may be possible that despite this rebate, the structured settlement company recommended by the insurance defense firm has the best offer. Your Tampa auto accident law firm can help to prevent this by writing into the settlement agreement that the defendant’s insurance company is not going receive such a rebate. Alternatively, your Tampa car accident lawyer should recommend several structured settlement companies to you and help you to compare the various structured settlement products so that you can make a decision which company offers you the best structured settlement terms.

One also has to consider that structured settlements are provided through companies and are not guaranteed or protected by the federal government. Therefore, if your structured settlement company goes bankrupt, the periodic payments to you can suddenly stop. It is important therefore that you consider the quality of the company you purchase your structured settlement through for settlement monies received in a Tampa car accident with injuries. For larger sums, your Tampa car accident lawyer might recommend that you consider purchasing your structured settlement through several different companies. Therefore, in the unlikely but possible event that one of the companies goes bankrupt or for some other reason stops paying you the agreed upon monies on a periodic basis, the other companies hopefully will continue their payments to you resulting in a less catastrophic outcome to you.

Finally, you should be careful that your Tampa injury law firm is not receiving any benefits from having you choose a particular structured settlement company. Sometimes, a law firm will get a rebate or commission for placing you with a particular company. This is a conflict of interest, and although it happens very rarely, you should at least be aware of that possibility. If you become aware of such activity, you should consider reporting the matter to the Florida Bar or your local Bar Association.

Our Tampa car accident lawyers are experienced in structured settlements and how they can be used in Tampa car accidents or other personal injury claims particularly when the injuries result in significant amounts of money being awarded to you. It is important that you speak with a Tampa law firm with significant experience in the settlement of injury cases that result in large monetary awards. Only an experienced Tampa injury lawyer will be able to give you the advice you will need regarding structured settlements that will help you make a good, sound financial decision with regard to whether a structure is appropriate for you and if so how to “structure” the structure. Should you wish to speak to one of our Tampa car accident attorneys about structured settlements, please feel free to contact us.