What Are Structured Settlements?
In its most basic sense, the term “structured settlement” simply means that the payments to be made to one party by another party will not be made all at one time.
While there are a number of non-traditional uses of settlement planning, the most common use of a structured settlement is to compensate personal injury victims in the settlement of a legal claim.
In this situation, a structured settlement is an agreement between you, the plaintiff, and the defendant wherein the defendant agrees to pay you certain future payments in conjunction with (or in the place of) a cash settlement and in exchange for releasing the defendant from the lawsuit or claim.
Instead of taking the entire settlement or judgment in cash, you have the option to “structure” all or a portion of your recovery in order to generate future payments designed to coordinate with your future needs.
The original defendant will generally “assign” his/her obligation to make the future payments to a major life insurance company (such as New York Life, MetLife, John Hancock, MassMutual, etc) and the payments are then paid to you by the life insurance company in the form of an annuity.
Benefits of Structured Settlements
Structured Settlements offer the personal injury claimant a variety of benefits that enable you to better reach your goals. Below are several of the major benefits that Structured Settlements can offer you as an injury victim.
Payments Are Exempt From Taxation -
Unlike typical annuities that generate taxable interest, both the principal and interest generated from structured settlement annuities written in the resolution of a legal claim involving personal physical injuries are completely exempt from federal, state, and local taxation.
This tax exempt status is an exclusive benefit to personal injury victims created by Congress in 1982.
The terms of the structured settlement become part of the Settlement Agreement and Release you sign with the defendant, and the check to fund the future payments is sent directly from the defendant to the annuity company.
This process insures that constructive receipt is not triggered, which preserves the favorable tax treatment of the structured settlement.
Can Be Tailored Specifically to Meet Your Future Needs -
As part of a Settlement Plan, structured settlements can be tailored specifically to meet your future needs. For example:
- Future college payments
- Anticipated future medical needs or future surgeries
- Retirement income
- Future living expenses
- …ect.
Payment Streams Are Customizable -
Future payments do not need to be paid in equal amounts. We work with you to determine your short and long-term financial needs, and help you create a payment structure that helps you reach those goals one by one.
Your Structured Settlement can include monthly payments, lump sum payments, annual payments, or a combination of each. This enables you to have the comfort of knowing that your income stream is created around your current and future needs… not created as a “canned”
Who Are Structured Settlements A Good Option For?
Structured settlements alone are not suitable in all situations.
They are particularly suited for individuals who have an ongoing need for reliable, guaranteed income. Since many personal injury victims are no longer able to work or have a diminished working capacity, a structured settlement as part of a well thought out settlement plan may provide you with security and guaranteed income for years into the future; even for your lifetime if desired.
What Is Your First Step?
As with any major financial decision, it is important to make sure you are working with a professional that has your best interests at heart.
Therefore, before accepting a structured settlement offer from the defense, or from a broker loyal to the defense, make sure that you consult a plaintiff-loyal settlement planner to help you evaluate the pros and cons of a structured settlement for your particular situation.
A plaintiff-loyal settlement planner(and one that is a member of the Society of Settlement Planners) will help protect you every step of the way. If (and that’s a BIG IF), a structure settlement annuity is appropriate as part of your settlement plan, your Settlement Planner will help you survey all of the annuity marketplace to obtain the best possible annuity rates with the highest rated companies.
And if a structured settlement annuity is not wholly or partly appropriate as part of your settlement plan, your Settlement Planner will discuss and recommend alternatives, such as various trust products tailored to the specific needs of claimants in general, and you in particular, all with long, successful track records of professional money management.
In summary, we’ll help you understand all of your options, but the final decision will always remain entirely yours.
If you are a claimant in a personal injury case, contact us, or have your attorney contact us to ensure that you are protected and you have a settlement planning expert on your side.
If you are a plaintiff attorney, contact us to limit your liability and ensure that your client has the best advice possible when it comes to the financial aspects of the settlement.
Please contact us to discuss your case.
