A structured settlement is technically a financial agreement, or in some cases, an insurance agreement defined as payments done on regular intervals, usually monthly, as to resolve an injury claim or a lawsuit.
Why is this done?
Structured settlements are often bestowed by law to allow the liable party to pay smaller portions of the payment rather than having to pay a large lump sum in a single instance.
Benefits of a Structured Settlement
Structured settlements are very helpful for the both liable party and the claimant party for many reasons. Now what are they?
- Less or even zero tax responsibility. In most cases, the financial obligation of the liable party is exempt from tax. This is also beneficial for the pursuing party, as the money can be obtained as a whole.
- Saving. Though many won't realize this, having the money to split up in different payments is actually helping the pursuing time to save money. (Or to prepare it for long-term spending) Huge lump sums are very tempting, and before the pursuing party can actually benefit from it, they may have actually spent it all.
Structured Settlement as a Means of Investment
Common forms of investment include businesses, time deposits, foreign exchange, and even buying stocks. Though these kinds of investments are still popular, many do not know that these investment types are already getting 'crowded.'
With the demand for alternative forms of investing money, the idea of using structured settlement, by selling or buying them came up.
An example of a case of using structured settlements as a form of investment is here:
Suppose Mr. X has won a case in an insurance company granting him $3000 a month. However, instead of Mr. X being content to having this fixed amount of money per month, he wants to have it all at once. Probably to fund a business of some sort or because of personal reasons, like having a surgery or something that needs a huge sum of money. Whatever the reason he wants the money; this is the golden opportunity for an investment.
So in goes the investor. What the investor does is that, he buys the rights for the structured settlement payments. For example, an investor buys Mr. X his rights to the structured settlement for $300,000. If the payment contract is $3000 a month for 10 years, the investor would have profited $60,000 in 10 years. Huge isn't it?
There are many ways to do this, and it isn't limited to just buy-and-sell. More information regarding structured settlement as an investment vehicle can be found on investment-specialty sites or sites that do sell structured settlements.
Sell Structured Settlements
Before selling or buying structured settlements, make sure to consider different factors like:
- For what reason are you selling/buying structured settlements?
- Will buying/selling it yield better returns in the future?
- Would this really benefit me?
Remember, structured settlements often involve a lot of money, so be careful in doing decisions involving them.
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