Structured settlements are agreed when two parties opt to reject the case in exchange for a financial agreement to be made by the defendant. The defendant and the plaintiff decide to make regular payments over a period of time. Most aggrieved parties choose structured settlement options because of the benefits it offers.
Under section 104 (a) (2) of the tax code, the amount you received for damages or due to a physical illness or injury, 39 even if you have many other sources of income available to you. Unlike dividends, salaries, royalties and other forms of income, the payment you receive from the structured agreement is exempt from tax payments. The tax evasion benefits of structured settlements have made these agreements attractive to parties that cannot find any other form of investments that can lead to tax-free benefits.
Many parties opt for lump sum payments instead of regular payments to invest in another company in the future, but are obliged to pay taxes on dividends or royalties, which they receive from these investments. Another reason to opt for payment of the lump sum of the structured settlements is that the parties may not feel that the payment they receive is sufficient to cover their medical expenses as well as the needs of the family. To this end, many parties opt for lump sum payments and those who have already agreed to sell them elsewhere to earn money and meet their daily and medical needs.
In deciding on the structured Settlement agreement, the applicant must take into account several important aspects such as the decision on the value of the periodic payment, the terms and conditions, the risk involved and much more. The structured settlement agreement should be properly implemented to benefit from the benefits of future security and tax evasion. There is no other source of income that is tax-free as annuity payments for structured settlements. This important advantage of the structured agreement encourages aggrieved parties to accept periodic payments.
Many Parties receiving periodic payments decide to sell their settlement plan if they do not have enough money to meet their emergency medical needs. And they accepted the amount of the payments regardless of their own expenses correctly. This is because once you have agreed to the terms of the agreement, it cannot be changed.
Therefore, in terms of tax benefits, structured settlements are the way forward when a payment is received. One of the disadvantages however is the fact that its settlement payment is usually set and is not adjusted depending upon inflation. This means that in track payments it may not be enough to cover expenses as the cost of living increases. However, there are a number of benefits that make this type of settlement a popular form of insurance payment among Americans.
Source by James T Monaghan http://ezinearticles.com/?Tax-and-Structured-Settlements&id=3875176
