Structured Settlements: A Brief Overview of What it is
Structured settlements are a specific type of financial arrangement wherein the entity or the individuals are issued with payment in a stipulated series till the entire amount of the settlement is received by them. Such settlements are in general extremely detailed and follows a particular schedule which leaves absolutely no doubt regarding the time and date of the receipt of the payment. Majority of the insurance companies use the structured settlements in order to settle the various legal implications or claims where in giving out a lump sum payment depending on the judgement of the court would become a financial difficulty for the party that has been ordered to make the settlement.
These structured settlements are truly the most viable alternatives to the lump sum settlement model. When there has been a decision to settle the entire amount, the recipient gets a single huge amount that is adequate to settle all the amount of the insurance claim or the judgement. But, in order to make it convenient to the party that is paying the amount, this structured model facilitates for a periodic payment of the same amount which is scheduled for disbursement at specific schedules in the specific time frame. Majority of the insurance companies favor the structured settlements model as it gives them the leverage to honor the coverage terms as well as engage actively in maximization of the cash flow.
The other party who is in the receiving end too also can enjoy a few benefits with the structured settlements. The most obvious benefit is of course payment of taxes. In majority of the countries money that is obtained through settlement is taxable. But when the recipient receives a series of such payments, the taxes too on the structured payments will attract less tax over a span of time. As the amount is received incrementally and not in a lump sum, the recipient will end up paying only fewer taxes on the entire sum taken together.
Of course, the structured settlement brings along with it a series of responsibilities. The rules of taxation on such periodical receipt of the settlement amount too attract a certain percentage of tax and put the tax payer in higher bracket. Therefore, it becomes essential that one seeks the advice of an accomplished financial advisor who is well versed with the existing status of the tax laws in the given place so that he could advise him accordingly and arrange for the appropriate financial solutions so that he can legally minimize any kind of tax debt. And, at the same time get maximum benefits through the receipt of such structured settlement.
Structured settlements are not prevalent in all countries. The US, UK, Australia and Canada are, in fact notable examples wherein this concept of structured settlement has gained amazing popularity. Sovereign Funding is one such online stop that specializes in structured settlements.
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