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Pros & Cons to Structured Settlements

Structured settlements are ideally suited for many different types of cases. However, once the terms are in place, they cannot be changed. Because of these inflexible contracts, some recipients choose to sell their payments for a lump-sum payout.


  • In the event of the recipient’s premature death, the contract’s designated heir can continue to receive any future guaranteed tax-free payments.
  • Payments can be scheduled for almost any length of time and can begin immediately or be deferred for as many years as requested. They can include future lump-sum payouts or benefit increases.
  • Unlike stocks, bonds and mutual funds, structured settlements are not dependent on fluctuations of financial markets. Payments are guaranteed by the insurance company that issued the annuity.


  • Once terms are finalized, there’s little you can do to alter them if they do not meet your needs. You cannot renegotiate the terms if your financial situation changes.
  • Funds are not immediately accessible in case of an emergency, and recipient cannot invest the lump-sum payout in other investments that carry higher rates of return.
  • Tapping into your structured settlement without selling payments will cost you money. You will pay surrender charges and IRS penalties if you withdraw funds before age 59½.