Many people have heard the phrase “structured settlement” and may even understand the basic concept of what this entails. However, they probably do not understand how this process actually works. More importantly, they may not understand why settlement planning can benefit them. In this two-part article, we will educate you on the reasons why you should hire a professional to create a settlement management trust on behalf of your personal injury clients. In the second section, we will discuss the most popular long-term and short-term strategies for devising a settlement plan that suits your client’s needs.
The Problem With Lump Sum Payments
When personal injury plaintiffs win a large settlement, the majority elect to take a tempting lump sum payment. With a few exceptions, this has proven time after time to be a bad idea. Lump sum payments have an unsuccessful track record for a variety of reasons. The primary reason why they are a bad strategy is that they promote overspending and unwise investments. And it’s easy to understand why.
Instead of saving for future “rainy day” expenses like medical bills or a retirement plan, people tend to use their settlement money for non-essential items. In some cases, they may also be pressured by friends or family to help foot the bill for their expenses as well. Simply put, because the person has easy access to the money, the funds are typically gone in less than five years. At Synergy Settlements, we can help you devise a long-term strategy through a structured settlement.
The Diversity of Structured Settlements
In the vast majority of settlement cases, it’s best to place the settlement total into a settlement management trust as this investment will help navigate the client in the right financial direction moving forward. When properly implemented, settlement planning gives the settlement recipient long-term protection and allows them to allocate their money into a payment system that suits their financial needs. As we will discuss in more detail in the next section, settlement plans can pay out the recipient weekly, monthly, annually, once a decade, or on designated dates well into the future. It really just depends on what the trustee desires and what works best with their financial plans.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.