What is a Structured Settlement Annuity?What risk and Benefits involved?
Structured Settlement is a financial arrangement that allows court-awarded compensation to be paid in regular installments rather than in one lump sum. These payments provide money for a fixed period or lifetime and are usually paid via an annuity. An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments and in return obtain regular disbursements beginning either immediately or at some point in the future.
The benefits are continued payments over a specific period of time. Backed by top rated insurance companies. Plus the payments are tax-free for personal injury cases.
The people who typically receive structured settlements are
People with disabilities
Guardianship cases involving minors or mentally incompetent individuals
Wrongful death cases where monthly or annual income is needed
Severe injury cases where long-term needs for medical care, living expenses and family support are required
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.
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.
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.