For people who live paycheck to paycheck, often struggling to meet their various financial obligations, a large lump sum settlement payment sounds like an enticing option. If you’ve gone without for so long and have been unable to purchase large ticket items, such as a home or car, due to budgetary restrictions, you probably view a big financial windfall as a very good thing. In reality, chances are extremely high that you will blow through this money far too quickly leaving you in a much worse financial situation than when you started. It’s for this reason and many others that a sell structured settlement option is typically the wiser path for the payment of large settlements.
The Hard Facts
Despite what you may think, coming into a very large sum of money all at once usually ends pretty badly.
- Most lottery winners – a whopping 65% – are bankrupt within 10 to 15 years. And many statistics state that about 90% of these big winners blow through the money within five years.
- The divorce rate of big lottery winners is very high – approximately 87%.
- Tax breaks from a structured settlement payment arrangement can save you as much as 30%.
- After subtracting expense, taxes and costs, the total of the lump sum payment you receive with the investment income you are able to secure from it is usually much lower than the sum total of structured settlement payments you will receive.
Benefits of a Structured Settlement Payment Option
- Tax Benefits – Your structured settlement payments for a personal injury are typically tax exempt on both the state and federal level. Even if your structured settlement payments are taxable, you will likely still benefit from other applicable tax benefits. This protection on investment income is lost when you accept a lump sum.
- Government program eligibility – Odds are you are debating whether to take a lump sum or a structured settlement arrangement due to a serious injury. The financial assistance provided by Medicaid, Supplemental Security Income and other income-based benefits should not be discounted. Accepting a lump sum payment will likely disqualify you, while a well-structured long-term payment option can establish a trust for your injury-related care, which is much more likely to ensure your continued eligibility for these vital programs.
- Long-term financial security – Again, if you are reviewing a settlement as the result of a serious injury, there are factors that are unique to these circumstances. First and foremost is the establishment of guaranteed regular income since you are likely no longer able to earn a living on your own. Unlike a lottery winner, if you blow through your lump sum settlement, you probably can’t just return to work.
- Flexibility – An experienced, skilled structured settlement company will tailor your payment arrangements to meet all of your very particular requirements and to anticipate and address probable future contingencies. This includes immediate needs that may require a larger sum initially, ongoing expense such as medical care and wage replacement, and future costs, such as college funds.
- Estate Protections – You can structure your payments to be passed on to a beneficiary in the event of your death.
- Avoid moochers – Face it, long lost “friends” and “relatives” are going to come out of the woodwork to ask for money once they learn you have come into a big settlement. People will hit you up for loans, investments, handouts and other financial assistance. Whether you will or won’t be able to resist these pleas, avoiding the whole mess since you opted for a structured settlement payment arrangement is far more appealing, isn’t it?
If you are interested in reviewing your settlement payment options with an experienced professional, turn to Strategic Capital for straight answers and expert guidance. Call 1-866-256-0088 or contact us online.