What You Need to Know About Structured Settlements

Structured settlements are periodic payments designed to meet the future needs of claimants. The payments can be scheduled for any length of time, including the claimant’s lifetime.

Benefits

• Claimant receives money when it is needed, correlated with the actual need for funds.
• Claimant does not have to pay income tax on payments received from a “Qualified” structured settlement.
• Claimant avoids the risk of mismanagement of funds.
• Money is invested at a competitive rate of return.
• Payments can be made for a claimant’s entire lifetime, with guaranteed funds left to a beneficiary. Under this option, the claimant cannot outlive their payments.

What Are The Tax Advantages?
With personal, physical injury claims, the payments are tax free, regardless if paid in a lump sum or periodic payments. However, if the claimant were to invest the lump sum, the interest earned may be taxed. With a structured settlement, the interest earned by the annuity will continue to grow tax free for the life of the annuity. This means that claimants could receive more money with a structured settlement than if they were to settle by receiving a single cash payment!

How Do They Work?

A structured settlement is typically funded by the defendant’s purchase of an annuity, owned by an assignment company. The assignment company is a third party who takes the place of the defendant and makes the promise to pay the claimant.

Are The Payments Flexible?

The annuity benefits can vary from monthly payments for medical expenses to a large lump sum payment for a retirement home. The options are virtually endless, and are predetermined at the time of settlement.

Show Me A Comparison:
A 46 year old male was injured on the job. At the time of settlement, he had to choose between a cash lump sum payment of $100,000 or a structured settlement proposal. He opted for the structured settlement that will provide monthly payments for the rest of his life, with a 20-year guarantee, to be paid to his beneficiary if he dies within the 20-year period. Each month he will receive $500.