Winning a large sum of money through a recent personal injury lawsuit can be exciting. You will be relieved the case is over and that you won, and you may be anxious to get your hands on the money. When a case ends with a large settlement, you may have two choices with how you receive your money. Before you select the option you prefer, it is wise to investigate both first.
The two options
The two options you may receive for this money are a structured settlement or a lump sum payment. A lump sum payment is a one-time payment in which you receive the full amount of compensation you won from the case.
A structured settlement is an annuity, which means that it is a steady stream of payments over a certain length of time. With this option, the total settlement amount is divided up into equal payments. You may have some control over how many years it lasts or over the frequency of the payments, and you can talk to your lawyer about these options.
Pros and cons of each
Each option offers pros and cons, and you will need to seriously think about which is better for you. The benefits of getting a lump sum payment include:
- You will have all the cash in your hands.
- You may be able to invest the money and make a lot more money from it.
One of the downsides of choosing a lump sum payment is that if you choose to invest it and end up making a lot of money on interest, the interest you earn will be taxable.
The benefits of choosing a structured settlement include:
- You will not be able to overspend the money you earn.
- All of the interest earned on the account is tax-free.
The downside to choosing this option is that you will not have access to all the money you have, and this could pose problems if you wanted to use it to buy a house or any other large asset.
Both of these options have advantages and disadvantages, but after learning more about each, you may be able to make a wise decision that would be best for you.
If you are not sure which option would be right for you, talk to your personal injury attorney. He or she may be able to give you more advice about both, and this may help you select the right one.