This is a dilemma that faces most when it comes to a structured settlement – which is better, a lump sum payment or one that is on a monthly basis? Each of these has it plus and minus points. In order to make an informed decision it would be best to understand all aspects involved.

Lump sum v/s monthly pay outs

In a lump sum annuity you get all the money that is due to you after a deduction of taxes, fees, and any applicable penalties. The disadvantage is that it is generally offered for when a huge income is due to you – from a lottery win or a case settlement. In such cases monthly installments would be better since the tax deductions involved ensures that you don't lose too much.

The advantage in a lump sum payout would be that it gives you immediate cash in hand for any expenses that you have holding back like clearing a credit card bill or investing in a start-up business.

Structured Settlements

A structured settlement is offered to you when you win a lawsuit or a lottery winning. This means that you are given a payout every month. This will be a fixed amount. The advantage is that the final amount you receive will have all the deductions already made. This frees you from the yearly tax hassles involved. Should you so require, you can raise a petition in court, to increase the amount payable to you or have the whole thing handed over. But in such cases, the decision of the court is final. In the case of some litigation cases, a monthly settlement is part of requirement in case closure leaving you with not much of a choice.

Balancing the two

Which of these two options works for you is a matter of what your requirements are? Before you make your choice, you will have to assess your future plans as well as your retirement issues. The services of a tax consultant would be most useful at this stage to understand tax liabilities. They will help you understand the intricacies of taxation policies involved. A clear assessment of your needs is what is required at this juncture.

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