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The purpose of this page, is to help people understand what a structured settlement is and how to benefit from in. Generically, the definition of a structured settlement is: Under a structured settlement, a plaintiff will not receive compensation in one lump sum but will receives a periodic stream of payments according to the terms of the structured settlement. In simple terms, it means for some reason you will receive annual payments from someone. Common reasons for structured settlement are Lawsuits and Lotteries. Although most states offer a lump sump option when purchasing a lottery ticket, only a small percentage select this option when purchasing the ticket. This means that when someone Wins the $52 Million Dollar jackpot, they may receive it as 26 annual payments of 2 million. Some firms specialize in purchasing the structured payments, so that the person can realize more of the money now. The question becomes, if I win $100 million and will be paid that for then next 26 years, what is that worth as a lump sum. The calculation is very similar to calculating a mortgage but backwards. Let's assume that the purchaser of the structured settlement of 100 million, is expecting a return of 8% over then next 26 years. using a mortgage calculator or any investment calculator you find that if they paid you 13 million today that would result in an 8% return for the next 26 years. You may be thinking... they are buy 100 mill with only a 13 mill investment, this is true, but they do not receive the benefit for 26 years. Structured settlements are designed to ease the burden on the person paying. If you can wait for the money, that is generally the most beneficial route. If you need it now, expect a substantial discount in what you get paid. Then again, if you are 90 and when the lottery, it might be your best route. |
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