The Pros and Cons of Taking a Lump Sum Settlement

You may come across such a situation, where you have won a compensation case. In such a case, you might be offered a choice as per the settlement, which is being made to you. So you might be offered a structured settlement that makes a sequence of regular payments over a fixed period of time as long as your agreement does not get fulfilled. You might also be offered the option of a lump sum payment.

It depends upon you own suitability and personal preferences, as to which option, you would choose. As it is, most people would advise to opt for a lump sum amount of payment. However, before, you reach a conclusion; you need to consider the pros and cons of the situation.

One of the major benefits of opting for a lump sum settlement instead of a structured settlement is that you have your money in hand. Thereafter, you are done with the situation and do not have to be bothered any more. You may then use this lump sum, in a way as it might seem fit for you. In case of larger lump sums you might simply invest them, in order to provide you with an income on a regular basis. It may also be used for modification of your house, so as to make your life comfortable.

Apart from that, personal circumstances are also a major factor in the kind of settlement, which suits you in such cases. So, in case, you or your loved one got disabled due to an accident, or got critically injured, requiring extensive medical expenses, then in that case, a lump sum payment would go towards purchasing of equipments, incurring medical expenses etc.

Similarly, in case you feel that you may no longer carry out the same career, then in that case, a lump sum payment would prove to be very helpful to you in changing jobs. You might also use it for setting up for yourself a business in case you feel so.

However, accepting a lump sum has its own disadvantages as well. The first and foremost disadvantage is that of lavish spending, or spending over unnecessary items. You may, end up spending the entire amount, with very little actually put up in for productive purposes.

Another major disadvantage is that of tax burden. As a matter of fact, a lump sum payment tends to attract more in terms of tax than in case of a string of structured settlements.

When it comes to deciding as to whether to opt for a lump sum payment, or structured settlements, you may consider the above points, along with your own suitability in regard to the issue.