Pros and cons of structured settlement

Structured settlements are a long-term financial security. Whether your settlement payment type is a lump sum or structured, it is imperative to receive those funds without much hassle. As the adage goes, there are two sides to a coin, similarly structured settlements has its own pros and cons. Having said that, this applies to both settlement payments types, i.e., with lump-sum (money in a single large payment, rather than smaller separate payments) and structured (payments at frequent intervals) moreover it may be a tax consequence, inflexible contract or any other financial concern. Hence, it is vital to weigh the pros and cons before you make a decision.

Pros of structured settlement

• Structured settlements are not affected by fluctuations of financial markets, unlike stocks, bonds and mutual funds. One can have a guaranteed payment by the insurance company that issued the annuity.
• For any length of time, payments can be scheduled. As appealed, it can begin right away or be postponed for as many years.
• In the event of premature demise of the recipient, the agreement's chosen beneficiary will continue to receive tax-free payments.
• Over time, there are chances for you to receive more money, which is one of the biggest advantages, i.e., both the principal and interest that accrues over time are not liable for taxes, so you will be receiving more money.

Cons of structured settlement

• Once the terms are in place and upon finalizing it, there's nothing you could do with them, if they do not meet your desired needs. There are no chances of renegotiating if there is a change in your financial situation.
• You are entitled to IRS penalties and surrender charges, if you are withdrawing the funds before the age of 59. Without selling the payments, tapping into your structured payment will cost money.
• You are not accessible to the funds immediately, even in case of an emergency.
• The lump sum received cannot be invested in other investments with higher rates of return.
• Many a times there are chances for you to be stuck on the sidelines with investment opportunities, even though you are entitled to receive money in the future.

With all that said, depending upon the case, the pros and cons of structured settlement differ. Every case is unique, so, it's up to you to weigh the favorable and unfavorable factors. Though everyone needs money, the reasons are different and, no one knows your sense of urgency; it is you who can better understand it, so act wise to have a more stable financial life.