Reaching a financial settlement in a personal injury case is meant to provide the funds needed for the claimant to live comfortably without money worries. Yet bad investment decisions or careless spending can leave the injured party unable to pay creditors.
The urge (or necessity) to spend beyond one’s means is increasing. Data from Lending Tree shows the average credit card debit in California was $10,496 for 2018 (fourth highest in the country). According to the Federal Reserve Bank of New York, the number of people who are over 90 days delinquent on their credit card payments is on the rise.
A structured settlement enables injured individuals to receive a steady, guaranteed stream of tax-free income designed to meet day-to-day living expenses and to pay for large anticipated expenses as they occur. Structures can also factor in unexpected expenses.
Financial Discipline. Structured settlements give injured individuals and their families the financial discipline that’s often needed after receiving a large settlement payout. There is no need to decide on how to invest the funds. The underlying securities within the settlement annuity are placed in safe and secure government securities and investment-grade bonds. Since settlement funds are paid out in increments (typically monthly), money cannot be handed to long lost relatives or “friends” who suddenly appear or “invested” in get rich quick schemes.
Of course, injured claimants can still rack up large credit card debt even with a structured settlement in place. However, when a settlement is structured, claimants will be less tempted (and have fewer opportunities) to overspend and jeopardize their financial well-being.