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We have all heard the commercials about structured settlements. But if your lawsuit is wrapping up, how do you know whether to consider this planning tool?

A structured settlement is a planning solution used by some people who receive a settlement from a personal injury or wrongful death lawsuit or a workers compensation claim.

Those who decide to structure will receive compensation from their settlement over a designated time frame — rather than one single lump sum in cash. Settlement recipients have the flexibility to receive any combination of a smaller lump sum up front for their immediate needs and then designated payments for long-term needs.

Benefits of a Structured Settlement

A long-term structured settlement has several advantages. It provides:

  • Financial security for the plaintiff
  • Guaranteed, long-term income in predetermined increments
  • Tax advantages, as 100 percent of structured settlement payments are exempt from federal taxes

When settlement arrives, it is sometimes tempting to spend the lump sum settlement on a variety of expenses right away, which only wears away the money that was meant for a lifetime of care. Structuring a settlement helps ensure that the recovery a person receives is as beneficial as possible for medical bills, equipment, long-term care, and other expenses related to the injury. However, in the current marketplace, a structured settlement is not always the most ideal solution, which we go into detail about here.

Options Besides a Structured Settlement

At Milestone, we take a holistic look at a person’s life to determine which settlement planning tools fit their needs best. That means understanding the complexities of the injury and future needs and finding the options that enable our client to manage their needs for as long as possible.

For example, we helped a woman whose husband was killed. After receiving a wrongful death settlement, we set up a tax-free annuity for her young son, who suffers from spinal muscular atrophy. With the a $750,000 annuity, he will receive a combination of lump sums and monthly payments from age 18 to 35. These payments will allow him to get the extra care he needs in the future and cover expenses such as a new wheelchair, a van, and/or a modified home when he becomes an adult.

We assisted another family whose son suffered a traumatic brain injury. He received a settlement, and we identified the best plan for him moving forward. We established a trust that pays for all his medical needs, a Medicare set-aside so he can still get government benefits, and a monthly prepaid debit card to help him manage money.

There are countless ways to plan for settlement. The best idea is to work with an experienced settlement planning expert to discuss your needs and goals. Whether it’s through a structure, a special needs trust, or a combination of many tools, you can be sure your settlement will be as beneficial as possible well into the future.

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