RE: What is a Structured Settlement Annuity?What risk and Benefits involved?

How it works and what are the risk and benefits?

aj Gold Asked on June 3, 2020 in Business & Finance.
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2 Answers

These are financial platforms that include periodic payments to a claimant after a personal injury claim is found out of court against a responsible party. In lieu of a lump sum awarded for damages, the claimant and the issuing party agree to a structured payment schedule over time. Because of this, structured settlements can appear to be quite large in compensation numbers. When in negotiations, a responsible the claimant will have an attorney working for them who is an expert in the field. The structured settlement proceeds when an annuity is purchased through a life insurance company. This annuity will most likely pay out on a monthly, semi-annual, or basis during the lifetime of the claimant.

The Benefits:

These structured payments are in most cases, if set up properly by a settlement lawyer, tax free income in the eyes of the IRS, and offer a great source of guaranteed, fixed income for the receiving claimant. It should be noted, however, that investment accruals gained from settlement funds are considered taxable income. Because they are back securities, structured settlements can adjust over time to become something the claimant can draw from, or even cash out completely of if need be. If left alone, however the payments will always be there.

Risks Involved:

As with any financial element, there are risks involved with structured settlement annuities. These, however, are miniscule in comparison with the volatility of the stock market. There are no fluctuations concerning payments, but the health and stability of the payment is reliant on the health and stability of the issuing party. These institutions are often insurance companies, and can maintain a reliable and long term sense of stability. However, they are not insoluble, as was the case with AIG when they went belly-up a few years ago. Thousands of policy holders and structured settlement recipients were left holding empty bags as their assets were swallowed up with the insurance giant’s demise.

Star Answered on June 3, 2020.
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