Choosing between two forms of lump sum payouts
One of the commonly asked question regarding structured settlements is to take monthly installments or lump sum payouts. There are pros and cons of both these situations and there isn’t any particular answer that applies to each person. It is important to have basic understanding of annuities, payout options and structured settlements beforehand.
A lump sum annuity is the money that is due to you after deducting fees, tax and penalties. It is commonly given as an alternative to periodic payments but comes with few drawbacks. The option is usually used by contest or lottery winners in a lawsuit. The reason for which people choose for monthly payments is because there is a drastic difference in the money you get over the time and due to taxes.
However, the advantages can be sometime overshadowed by its disadvantages. This implies if you wish to invest in real estate or business but do not have enough cash available. Lump sum payments can provide you with instant cash and as a rule its better than getting the monthly payments.
Structured Settlement Annuity
Structured settlement annuity generally awards from lottery winnings or lawsuits. It pays you a particular fixed amount every month. Mostly the taxes on such money are already deducted so that you don’t keep on paying it every year. You can even increase or decrease your cash payout by filing a petition in the court.
It is actually dependent on the individual to decide what kind of payment he would like to have. Structured payment is helpful as you do not spend the entire amount in one go and save something for your future. Structured payment is sometime a part of settlement on paper and you may not get a chance to change it later.
The choice of choosing one out of the two mentioned payments is really dependent on your requirements, future plans and the time at which you wish you retire. You should consult tax consultants who will details you about all the taxes you wish to pay and also will tell you what you can do to ensure that you make the best use of your money.