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Structured Settlement vs. Lump Sum


When a personal injury claim results in an award or settlement, the plaintiff may have the option to receive a structured settlement or a lump sum payment. At Joubert Law Firm, our Baton Rouge personal injury attorneys can help clients evaluate their options and make an informed decision based on their unique circumstances. In this post, we’ll explain the differences between structured payments and lump sum payments and which option might be best for you. 

What is a Structured Settlement?

A structured settlement is a type of financial arrangement in which a plaintiff who wins a legal settlement or judgment receives payments over a specified period instead of receiving the settlement amount in a lump sum. The payments are typically made in regular intervals, such as monthly or annually, and are often guaranteed by an insurance company. The structure of the payments is predetermined and agreed upon by both parties involved, and it cannot be changed once the agreement is signed.

Structured Settlement Pros and Cons

Structured settlements are often used in personal injury cases where the plaintiff may require ongoing medical treatment or long-term care. By providing regular payments over time, a structured settlement can provide the plaintiff with a stable source of income and help ensure their long-term financial security. Additionally, structured settlements may offer tax benefits to the plaintiff, as payments made through a structured settlement are often tax-free.

Another one of the benefits of structured settlements is that they are astoundingly flexible. You can receive your payments for a set number of years, or for the remainder of your life. You can also choose how frequently you receive the payments, whether it’s every month or once a year. 

In a structured settlement, you can also choose how much you want to receive for each payment. You could decide to receive a large payment at the beginning and then divide the remaining amount of your settlement into smaller, regular payments, or you could choose to start with small payments that increase in size gradually as you get closer to retirement age. Some accident victims even make the decision to delay their settlement payments so that they start once they’ve reached retirement age. 

Structured settlement payments can accrue interest. However, unlike the rest of your settlement, interest will not be taxable. 

Stacks of cash lined up

What is a Lump Sum Payout?

A lump sum payout refers to a single, one-time payment of settlement money made in full rather than in installments or over a period. Lump sum payouts are often used in various contexts, including employee compensation packages, retirement plans, insurance settlements, lottery winnings, and legal settlements. In the case of legal settlements, a lump sum payout may be offered as an alternative to a structured settlement, which provides payments over a set period.

Lump Sum Pros and Cons

With a lump sum payout, the recipient has immediate access to the full amount and can use the settlement funds as they see fit. However, lump sum payouts may be subject to taxes and may not provide the same level of financial security as a structured settlement.

Most accident victims prefer a lump sum payout because it enables them to put the accident behind them and they can be finished dealing with the insurance company. Lump sum payouts also offer more freedom. Once all medical expenses are deducted, the remaining amount of the settlement can be used however you choose, whenever you choose, and at your discretion. 

One of the downfalls of lump sum settlements is that you may feel pressured by friends, family and acquaintances to share your settlement. You may also have trouble managing the money yourself. If the settlement is a very large amount, you may want to hire a financial advisor to determine how to best manage and invest your money. 

Two people exchanging money

What’s the Difference Between Structured Settlements and a Lump Sum Payment?

The difference between structured settlements and lump sum payments is in how the payment is made. A structured settlement is a financial arrangement in which the plaintiff in a lawsuit receives payments over a period of time, often in the form of a fixed schedule. The payments may be spread out over several years or even for the plaintiff’s lifetime. In contrast, a lump sum payment is a one-time payment made to the plaintiff, typically paid in full.

Structured settlements can provide the plaintiff with a stable source of income over a longer period of time, which can help ensure their long-term financial security. It may also have tax advantages, as payments made through a structured settlement may not be subject to income tax. In contrast, a lump sum payment provides the plaintiff with immediate access to the funds and greater flexibility in how they use the money. However, it may also come with tax implications and may not provide the same level of financial security as a structured settlement. Ultimately, the decision between a structured settlement and a lump sum payment depends on the individual’s specific circumstances and goals.

How Do You Know What Type of Settlement Is Right for You?

It’s important to consider your current and future needs before deciding whether to ask for a structured settlement or a lump sum payout. You may want to consider discussing the choice with a lawyer or settlement planning consultant. When considering a structured settlement or lump sum settlement, the right choice for you will depend on things such as:

  • The total value of the settlement
  • Medical care you need and if it will continue to be necessary in the future
  • Current bills and the need for money now rather than later
  • Whether or not you can return to work in the future
  • Tax benefits or disadvantages when accepting a settlement offer in a lump sum or structured manner 

While a lump sum payment may seem attractive as it provides immediate access to funds, a structured settlement may be more beneficial in the long run. With a structured settlement, the plaintiff can receive regular, tax-free payments over a specified period, providing a stable source of income. Additionally, structured settlements may be beneficial for those who require ongoing medical treatment or have long-term care needs. However, the decision ultimately depends on the individual’s specific situation and goals. Our attorneys can provide personalized guidance and help negotiate the best possible settlement for our clients.

Structured Settlement vs. Lump Sum

Speak With the Baton Rouge Attorneys at Joubert Law Firm For Guidance Through Your Personal Injury Payout Process

Whichever way you choose to receive your settlement funds, our main priority at Joubert Law Firm is making sure you receive the full amount you’re entitled to after a life-altering accident. Our experienced Louisiana personal injury attorneys know what it takes to fight the defendant’s insurance company when they try to reduce or deny your settlement, and we have the knowledge and tools to calculate the amount you may be owed after an injury caused by the negligence of someone else. Contact us today by calling (225) 777-8853 for a free case review to learn more about your options.

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