Structured Settlements for Wrongful Termination

Written on January 11th, 2008 by trevor

Using Structured Settlements to Effectively Help Those in a Wrongful Termination Case

When most people initially think of a Structured Settlement they immediately think of a personal injury case. While Structured Settlements are mainly used in personal injury type cases, they are also extremely effective in other situations such as Wrongful Termination cases.

If you are a claimant in a Wrongful Termination case, or a plaintiff attorney… read on to learn the possible benefits of using Structured Settlements to help effectively plan for taxes and financial issues after the settlement.

Since we are settlement planners, out to help you find the right solution to your problem (even if it does NOT include structured settlement annuities), we want you to know that Structured Settlement Annuities are NOT right for everyone. However, they are extremely effective when used in the right situations for the right people.

How Are Structured Settlements Effective in Wrongful Termination Cases?

The main benefits of using a Structured Settlement for a Wrongful Termination case include:

You can defer the tax hit into future years
Possibly reduce your overall tax hit on those proceeds because the funds may be received in a lower tax bracket later on
A guaranteed stream of future income is created
You avoid what can possibly be an ugly, nasty tax mess
Possibly eliminate the AMT (Alternative Minimum Tax)

When used correctly, Structured Settlement annuities can help you obtain some very attractive tax and financial benefits that other options may not offer.

Why May You Want to Consider Structured Settlement Annuities in Your Wrongful Termination Case?

There are many reasons why Structured Settlement annuities may be a great option for you in your Wrongful Termination settlement. The main reasons hinge around the tax consequences that you can possibly avoid by using Structured Settlement annuities to stretch out receiving your settlement proceeds over a period of years, rather than 100% in the year of the settlement.

If you anticipate receiving settlement proceeds from a case not involving personal physical injury, your settlement will likely be fully taxable in the year of settlement, and could push you into the highest tax bracket.

As if that thought isn’t depressing enough, consider this…

The Supreme Court decision in the Banks & Banaitis v. Commissioner cases held that “as a general rule, when a litigant’s recovery constitutes income, the litigant’s income includes the portion of the recovery paid to the attorney as a contingent fee.”

What this means to you as a plaintiff receiving a taxable damage settlement is that you must report the gross amount of the settlement as income, and then deduct the attorney’s fee “below the line.”

This often subjects you to the 2% floor on itemized deductions, and will likely phase-out your allowable deductions and can even trigger the Alternative Minimum Tax (AMT): a “perfect storm” of a tax nightmare.

How Do Structured Settlement Annuities Help Claimants Reach Their Goals?

Structured Settlement annuities simply allow you as a claimant in a Wrongful Termination case to stretch out the receipt of your settlement funds over a period of years rather than all at once.

By receiving your settlement funds over a period of years, you are able to better plan your financial and tax future. If you do not need most of your settlement funds right away, Structured Settlement annuities are an effective vehicle that allows you to defer paying the tax in addition to earning a pre-tax return on the funds while they are in the guaranteed annuity.

Some simple planning “BEFORE the proceeds of the settlement have been negotiated and paid“, can often eliminate the AMT entirely and help save you a bundle in taxes.

What Is Your First Step?

As a plaintiff in a taxable damage case involving:

Discrimination
Bad faith
Wrongful termination
False imprisonment
Construction defects
Breach of contract
…etc.

Your first step should be to contact a qualified Plaintiff Loyal Settlement Planner such as Settlement Professionals Inc, or have your attorney contact us to discuss your options. It is important that a qualified Plaintiff Loyal Settlement Planner be involved BEFORE the proceeds of the settlement have been NEGOTIATED and PAID. Once the proceeds are paid, it may be too late to effectively address your goals.

Our approach is to help you do a comprehensive review of your short and long-term goals, and to tailor a Settlement Plan that helps you address each goal one by one.

Remember, we do not charge a fee for our Settlement Planning services so you have nothing to lose by calling to learn your Settlement options.

Structured Settlements For Wrongful Termination Cases