When you’re healing from a personal injury, there’s a lot more to deal with than just getting better. You might be facing medical bills, missing work, and dealing with stress or emotional pain. At some point, you’ll need to think about settling your legal case, and one option that may come up is a structured settlement. So, what is a structured settlement, and how do you know if it’s right for you?
At Pacin Levine, P.A., we’ve helped many clients understand their options after an injury. Structured settlements can give you steady payments over time, which can help with long-term financial stability. But they’re not always the best choice for everyone.
What Is a Structured Settlement?
A structured settlement is a type of financial agreement that pays you compensation in scheduled payments over time rather than all at once.
Structured settlements usually come into play after someone wins or settles a personal injury, wrongful death, or workers’ compensation case. Instead of receiving a lump sum (one large payment), the injured party receives a series of smaller payments over months or years, or even for the rest of their life.
These payments are often arranged through an annuity, a financial product managed by an insurance company. The payout schedule can be customized. For example, you might get monthly payments, yearly payments, or a combination that includes larger payouts at certain times (such as when your child goes to college).
Structured settlements became more popular after Congress passed the Periodic Payment Settlement Act of 1982, which encourages long-term payments and offers tax advantages to claimants.
Benefits of Choosing a Structured Settlement
Structured settlements are customized payment plans that provide regular income over time instead of one large lump sum. While this option may not suit every case, it offers several important advantages for those looking for stability and long-term support after an injury.
- Guaranteed Steady Income Over Time
One of the biggest benefits of choosing a structured settlement is the predictable, steady stream of payments. This can be especially helpful if your injury prevents you from working or creates long-term medical needs.
With consistent payments, you can:
- Budget more easily
- Cover essential monthly expenses like rent, groceries, and utilities
- Maintain financial stability even during uncertain times
For many injury victims, a structured settlement acts like a reliable paycheck, helping ease financial stress while focusing on recovery.
- Tax Advantages of Structured Settlements
One of the biggest financial perks of this kind of settlement is the tax benefit. Under current U.S. tax law, payments received from a structured settlement for a physical injury or illness are 100% tax-free, both at the federal and state levels. This means you get to keep every dollar of your settlement payments without worrying about setting money aside for taxes.
This is a major advantage compared to lump sum payouts. While a lump sum itself might not be taxed initially, if you invest that money or place it in certain accounts, any interest, dividends, or gains could be subject to taxes. Over time, those taxes can eat away at your settlement and complicate your financial planning.
With a structured settlement, that risk disappears. Your payments are designed to be tax-free for the life of the settlement, no matter how long they last or how large the total amount is. This makes it easier to budget and plan for the future without dealing with the uncertainty or stress of complex tax issues.
- Peace of Mind with Long-Term Financial Security
A lump sum might seem tempting at first glance, but it’s easy to underestimate how quickly it can be spent. Between medical bills, debt, and inflation, that large payout can shrink fast.
Structured settlements help avoid those risks by spreading payments out, reducing the chances of poor financial decisions or pressure from outside influences. This is especially important for younger recipients or those without financial experience.
If your injury prevents you from working or earning a steady income, a structured settlement can help replace that paycheck in a safe, reliable way.
More: Can You Reopen a Lawsuit After You’ve Accepted Your Settlement?
Potential Drawbacks of Structured Settlements
While structured settlements offer many benefits, they’re not ideal for everyone. It’s essential to understand the downsides so you can weigh them against your personal needs.
- Lack of Immediate Lump Sum Access
The most significant drawback is the limited access to your money upfront. Unlike a lump sum settlement, which gives you all your compensation at once, a structured settlement pays out over time through scheduled payments. That can be a downside if you suddenly need a large amount of cash for an unexpected expense, like buying a home, undergoing a costly surgery, starting a business, or paying off high-interest debt.
While those future payments are still your money, accessing them early isn’t easy. In most cases, the only way to get a portion of your settlement in advance is to sell your future payments to a third-party company, often at a significant discount. These companies profit by giving you a smaller lump sum than the value of what you’d receive over time. That means you could lose a large portion of your settlement just to get cash quickly.
- Limited Flexibility Compared to Lump Sum Settlements
Once the terms are finalized, the payment schedule is locked in, and changing it later is extremely difficult, if not impossible. Unlike a lump sum settlement, which gives you full control over your money from day one, a structured settlement only provides access to the funds according to the preset schedule.
This can be frustrating if your needs or goals change over time. For example, let’s say you decide to go back to school, relocate for a new opportunity, or invest in starting a small business. If those expenses weren’t anticipated and built into your original structured settlement agreement, you may not have the immediate capital needed to move forward with those plans.
Even though you technically own the future payments, accessing a larger portion upfront is not easy. As with other structured settlement drawbacks, your only real option would be to sell some or all of your future payments to a third-party company, often at a steep discount.
- What Happens If You Need Money Sooner?
If you find yourself in urgent need of cash, your only option may be to sell your future payments to a company that specializes in buying structured settlements. However, these companies take a significant cut, often giving you far less than the total value of the payments you’re trading in.
This can be a costly way to get access to your own money, and it’s a situation many people end up regretting.
How to Decide If a Structured Settlement Is Right for You
Structured settlements are powerful financial tools—but they’re not always the best fit. So, how do you decide what’s right for your situation?
- Assessing Your Financial Needs and Lifestyle
Ask yourself the following questions:
- Do I need a large amount of money right now?
- Am I financially disciplined enough to manage a lump sum?
- Do I have ongoing medical or living expenses that require steady income?
- Am I confident in my ability to invest or manage a large amount of money?
If you answered yes to the last two, a structured settlement may be a great choice. If you’re more interested in flexibility or have big upfront needs (like buying a home or paying off major debt), a lump sum may be worth considering.
The decision is deeply personal and should reflect your long-term goals, not just your immediate needs.
- Consulting with Your Personal Injury Lawyer and Financial Advisor
Deciding between a lump sum and a structured settlement isn’t something you should do on your own. There are long-term financial and legal factors to consider, many of which can be difficult to navigate without the right guidance. That’s why it’s so important to consult with both your personal injury attorney and a licensed financial advisor before making a final decision.
At Pacin Levine, P.A., we work hand-in-hand with experienced financial professionals to help our clients fully understand their options. Our goal is to ensure you make a choice that supports your recovery, your goals, and your long-term financial security.
A knowledgeable attorney can do more than just negotiate your settlement—we’ll also help you evaluate how each payment option fits into your overall recovery plan. Specifically, we can:
- Review the total value of your settlement offer to make sure it’s fair and accounts for all your current and future needs.
- Explain the pros and cons of lump sum vs. structured settlements, tailored to your unique circumstances.
- Help you plan for long-term needs, including ongoing medical care, daily living expenses, and retirement.
- Protect you from predatory settlement purchasing companies that try to buy your future payments at steep discounts, often taking advantage of people in tough situations.
Contact Pacin Levine, P.A. for Expert Guidance Today!
Now that we’ve talked about what a structured settlement is, how it works, and how it compares to a lump sum settlement, you may be wondering what’s best for your situation.
At Pacin Levine, P.A., our experienced Florida personal injury attorneys have helped thousands of clients secure the compensation they deserve and make informed decisions about their financial futures.
We’ll walk you through the entire personal injury settlement process, help you weigh the pros and cons of each option, and work closely with financial experts to ensure your decision aligns with your long-term goals.
Here’s what we offer:
- Free Consultation with a personal injury attorney
- Clear, personalized advice on structured settlements and lump sum options
- Support from financial professionals who understand your needs
- Aggressive representation to ensure you receive what you’re owed
Call 1-800-24-7-CRASH now to schedule your free consultation and take control of your future today.
