You’ve probably heard the phrase ‘structured settlement’ if you’ve had anything to do with a civil lawsuit – maybe you’re going through one now?
If that’s the case, you’re probably asking yourself: What is a structured settlement?
A structured settlement is a concept you really know the ins and outs of because it usually means a lot of money is being moved. This might mean you are going to receive a lot of money, or possibly you may be required to pay a lot of money. Either way, it’s serious business and you are going to need proper legal guidance.
But, before you get to that point, let us give you the essential facts about structured settlement agreements.
How Do Lawsuit Settlements Work?
A lawsuit is a type of legal action taken by one party who feels that they have been harmed by another party in some way.
This harm may be physical (a lifelong injury), mental (lasting emotional trauma), or financial. The other party may be one person, multiple people, or an organization (like a hospital, a company, or a local government).
It’s important to note that it is a civil dispute – not criminal. This means that the penalty is only ever financial (although sometimes other penalties are included, such as the necessity for a public apology).
When a lawsuit is filed, one party is seeking what is called ‘damages’ from the other party. Damages are always represented as an amount of money.
The ‘settlement’ is the agreement that both parties make concerning how much money is to be paid. Both parties must ‘settle’ on an amount, as well as any other relevant terms or conditions.
Often, settlements can be resolved between parties (and their lawyers) without the use of courts. However, if the parties cannot reach a settlement on their own, they may need to go to court to resolve the dispute.
What Is a Structured Settlement?
So, now that we understand the basics, we can answer the question: What’s a structured settlement?
A structured settlement is a type of settlement in which the money paid to the plaintiff is broken up and paid out over time. So, it’s the opposite of a lump sum payment.
When a structured settlement is decided upon, it will include the following factors:
- Who exactly is involved in the settlement (things can get complicated when insurers, government agencies, or other third parties are involved)
- What the total amount of the settlement is
- Who gets what portion of the settlement
- How often payments will be made
- What the size of each payment will be
- How long payments will be made for
Structured settlement payments represent a lot of value – so much so that you can even sell the rights to your payments in exchange for an upfront lump sum. You can find out more about that here.
Know Your Rights and Obligations
You’ve been asking yourself ‘What is a structured settlement?’ and now you’ve got the answer. But you shouldn’t stop there.
You need to make sure that the terms of a structured settlement are beneficial to you and are going to keep on being beneficial to you. It’s a long process and you can’t take chances.
Get good legal advice and know your rights and obligations back to front!
If you’ve found this article useful, why not check out some of our other great articles for financial and legal advice?