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In many civil cases, particularly personal injury, you may never go to court. Instead, the parties may reach an agreement earlier in the litigation process, which results in a settlement. This means that the plaintiff will agree to no further legal action in exchange for receiving a money payment from the defendant or the insurance company.

Settlement payments can be set up to be made all at one time, or they may be spread out over a period of time. The latter is what is known as a structured settlement. The settlement provides you with regular payments or payments for the rest of your life.

With a structured settlement, the defendant’s insurer typically sets up an annuity policy for you. This will produce a steady stream of income over the course of the settlement. Structured settlements are especially good if you have suffered a permanent, or catastrophic, injury.

Before you decide anything, you should of course discuss this with your attorney. There are pros and cons to consider, and only your attorney will have the knowledge to guide you through the process in order to make a decision.

For instance, structured settlements may provide you with a substantial tax break. Lump-sum payments are considered as income and must be claimed when you file a tax return. Annuity funds must be managed by a professional and are considered tax-free as long as you, the plaintiff, do not control the funds.

In most states, annuities are protected by state insurance laws that guarantee payment should the insurer go bankrupt. Annuities may be tailored to fit your lifestyle and present and future needs.

A structured settlement may also help you and your attorney more quickly reach an agreement with the other side. This saves time and money, and can be a less stressful way to come to terms with a defendant or insurance company.

If you have legal questions about a settlement, please consult our Online Legal Directory to find an attorney in your area.

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