Beware of Lump Sum Payments

Everyone dreams about winning the lottery and how they would spend the money. Would you take the jackpot in one lump sum payment or opt for structured monthly payments? What most people don't realize is that many lottery winners actually go bankrupt in a few years because it is human nature to overspend. The situation becomes more critical when money is awarded from a malpractice or similar lawsuit. To protect recipients who have medical conditions resulting from another party's actions, the concept of structured settlements was born.

Structured settlements pay the settlement over time usually in fixed monthly payments. While the system works for many, some prefer a single upfront or lump sum payment even if that payment is less than the original amount paid over time. For people in severe debt, sometimes this appears to be the only viable option. Sounds fair right? Buyer beware, where money is involved, predators will always find a way to steal what you have coming.

When a settlement is made with an insurance company, that settlement can be purchased by a third party to supply all the money upfront in a single payment. In return, the investor will typically offer less for the settlement to reduce risk in case the person dies and the payments stop. This seems reasonable until you find out just how much less some companies offer and the deceptive practices used to lure in victims.

In cases of lead poisoning for example, an alarming trend targets people considered "competent" enough by law to sign away their structured settlements in favor of lump sum payments. The word "competent" is murky at best as some individuals even with minor brain damage find themselves caught by legal loopholes where just having a drivers license can work against the person. Proponents argue that if the individual managed to make it through high school and has a drivers license, learning disabilities are insufficient grounds for incompetence. With legal agreements often hard to decipher even by people without disabilities, foul play cannot be ruled out. Moreover, in many cases, the lump sum payment often works out to paying only a tiny fraction of the original structured settlement. Suspiciously, minorities with less education are often targeted the most. Although one cannot assume every company that offers such services is shady, being aware of this practice is the best defense against those that prey on unsuspecting victims.

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