One device that we use to help assure the financial security of our clients after an accident is a structured settlement. These are commonly used when a client faces a substantial loss of lifetime income, such as after a construction accident, or when there is a settlement involving a child.
What are Structured Settlements?
Structured Settlements are most often used in resolving personal physical injury claims or lawsuits. They create a stream of customized periodic payments and lump sums that are funded by annuities. When a structured settlement is used to fund a personal physical injury claim, it provides the payments tax-free. Structured Settlements are protected and governed by Federal legislation and IRS regulations. You can be confident that the overall benefit of structured settlement for injured people has been proven time and time again.
Who should use Structured Settlements?
Any combination of the following criteria may be used to decide if a structured settlement is appropriate for a personal injury situation:
• The loss amount is greater than $10,000 and there is an opportunity to defer some of the payments for three or more years.
– There is involvement of a minor child and a loss of $5,000 or more.
• The injured party has a desire for the security and peace of mind gained from receiving a steady stream of income over a long period.
• The injured party has little experience and some discomfort with managing large sums of money all at once or over time.
• The injured party wants to shelter the settlement monies from future taxation on the earnings.
• The severity of the party’s injuries and future care needs will best be served by a plan of periodic payments and lump sums.
Benefits of Structured Settlements
A structured settlement establishes a stream of periodic payments funded by an annuity provided by a highly-rated life insurance company. Using a structured settlement to fund a personal physical injury claim provides payments free from federal income taxation. And, structured settlements can be used to settle non-physical injury claims as well.
Deciding to use a Structured Settlement provides many benefits:
• Favorable Federal tax–exempt status • Favorable total yield on the fixed annuity• Predictability of payments • Lifetime payments and lump sum periodic payment combinations• Financial security and freedom
With a structured settlement, you receive these benefits without the worry of managing the settlement yourself and the responsibility of generating the maximum return for you, your family or a seriously injured person. There is no other investment vehicle that gives you this peace of mind.
Claims professionals, plaintiff attorneys, judges and defense attorneys advocate the use of structured settlements because they effectively meet the needs for security and provide better benefits over time.