A look at the different types of settlement options

Everybody loves to spend money. You cannot have an unlimited supply of green paper and if you have the need to pay someone a large amount of money, you would prefer to pay it bit by bit, instead of one go. This is where structured settlements come into picture, helping you pay someone else’s personal injury claim.

financewand.comA structured settlement can be defined as a financial agreement that makes one party pay to the other a set amount over a period of time. This is usually done to resolve personal injury claims. Structured payments are necessary if you decide to generate a monthly income for yourself instead of trying to handle the whole amount at one time. Now, you can get isettlement cash easily. Depending on the mutual agreement of the parties paying and receiving the money, they can choose one of the following payment options:

  • Joint and survivor annuities: When there is a person who is dependent on the payee both of them can set up a payment option in the same agreement. This way the dependent is protected even if the primary payee were to die. The payment will continue at the rate as to whatever was agreed upon in the contract.
  • Deferred defined benefit annuity: This option works for payees who have sufficient funds to work with at the current time. They can delay their payment date to a later day with increased benefit.
  • Period Certain Annuity: This type of annuity has a stipulated time frame in which the amount ought to be paid. For example it can be used to handle the college fees, handle legal charges or establish a retirement fund. After paying for the fixed time the remaining amount still owed can be obtained as a lump sum payment.
  • Treasury Funded Structured Settlements: In order to protect the payee this payment structure uses both TIPS and STRIPS to adjust the principal amount with the rise and fall in the inflation rates.
  • Variable income payout structures: The payee can choose to not lose out on the market equities by investing his settlement money. This income is also tax protected like the fixed settlement amount. But the payee will need to risk the variations in the income as it is dependent on the chosen portfolio.

All the above options are viable but their efficiency varies from case to case.

Sometimes the payee can choose to demand lump sum payments depending on their situation. Payees can also enhance their income by buying a part of settlement options from the second hand market at good rates, to cash in when the need arises. Though most of the time long term settlement options are the way to go, in case of an emergency the need for hard cash arises, then the settlement options can also be sold to prospective buyers for a little less money than the total amount that would be finally earned. It is best to decide on the settlement option after having a talk with your financial advisor.

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