As a personal injury lawyer in Silverdale negotiates with an insurer to acquire the financial compensation a client deserves, that insurance company may decide to offer the full amount in a lump sum or in a payment arrangement known as a structured settlement. There are distinct advantages with structured settlements, although many people still prefer to receive the full amount all at once.
Tax Break
A primary advantage with the payment arrangement is that the government protects these types of settlements from taxes. Thus, the person receives the money tax-free. With a lump sum, taxes must be paid on the amount. Having an experienced personal injury lawyer in Silverdale carefully review the documentation is crucial to make sure it conforms to federal regulations that protect against tax obligations.
Financial Hardship
Although the tax break can be substantial, many people find that accepting structured payments would be a hardship. They may have been waiting a long time for a settlement and may be facing extreme financial difficulties. They might be nearing foreclosure and living on credit cards. It is common for people not to have enough savings to weather the storm after a serious injury. So many men and women live paycheck to paycheck that being unable to work for any length of time leads to dire consequences.
Reasons for the Regulations
The federal regulations were set up to take some of the burdens off of insurers who would otherwise have to pay a very large amount all at once. By providing plaintiffs with significant tax breaks, the outcome is favorable for each side.
A Structured Settlement Example
Sometimes the payment arrangement continues for many years. A full sum of $2 million, for instance, might be divided up over ten years, bringing $200,000 of income to the individual or family annually with no tax obligation. Often, that initial payment is more than enough to get the plaintiff out of the serious financial trouble that has developed after the injury. Anyone who needs legal assistance with these matters can schedule an appointment with an organization such as the Law Offices of Anthony C. Otto.