What is the difference between a lump sum settlement and a structured settlement in Ontario?

A lump sum settlement means you receive the full agreed amount in a single payment, usually shortly after the settlement is finalized. A structured settlement spreads payments over time — monthly, annually, or according to a custom schedule — often funded through an annuity purchased by the defendant or their insurer.

Structured settlements are most common in serious personal injury cases where the plaintiff has long-term care needs. The regular payments provide financial security and, in personal injury cases in Canada, are generally tax-free just like a lump sum, as long as the periodic payments represent personal injury compensation. This makes them attractive compared to investing a lump sum where investment income would be taxable.

The main trade-off is flexibility. A lump sum gives you immediate access to the full amount, which you can invest or use as you see fit. A structured settlement locks in payment terms, and you generally cannot access the principal if your circumstances change. Some structured settlements include provisions for early payment upon death or disability, but the terms are set at the outset. Before agreeing to a structured settlement, it is wise to involve a financial advisor and a lawyer who can help you model out which option better serves your long-term needs.