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Tags: finance, structured settlements, a structured settlement annuity
 In a civil case one person sues another for compensation, typically for an injury. When the plaintiff of such a case, let’s say you, settles with the defendant in exchange for a large amount of money, all parties concerned—the defendant, you as the plaintiff, and your attorneys—will usually agree to the payment of the resolution amount in installments over a period of time instead of paying it off in one single lump sum.
When a resolution is paid in this manner it is called a structured settlement. The structured settlement annuity is often created through the purchase of one or more insurance contracts or annuities. An annuity is sort of an contract created when one party, through a, structured settlement broker or settlement planner, pays an insurance company money that can then be distributed back to a beneficiary in several ways.
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The defining characteristic of a structured settlement annuity contract is the option for a guaranteed distribution of income until the death of the beneficiaries named in the contract. A structured settlement annuity can provide for payment in any schedule that you, as the plaintiff, may choose. The installment payments from a structured settlement annuity can be made in a number of ways to suit your needs and to protect you from inflation.
Life payment annuities provide a lifetime guaranteed income for you to maintain your current standard of living. Depending on the issuer, the payments may be made weekly, bi-weekly, monthly, quarterly, semi-annually, annually, and even every other year. Deferred lump sum annuities can be made at pre-determined time periods for special funding needs such as college education, future medical costs, retirement planning, for reinvestment and as a hedge against the effects of inflation.
Step annuities provide income that has graduated increases over the initial payment amount for a fixed period and/or lifetime. Percentage increase annuities, like the step type, also provide graduated increases over the initial payment amount by using a fixed percentage to provide annual increases to income as a protection against inflation.
Deferred defined benefit annuities allow you to defer the start of the payments to a later date with a known benefit payment plan. Joint and survivor payments are for two separate annuitants under one contract, whereupon the payments will continue to the surviving payee after the primary payees death at a rate equal to, or at a predetermined percentage of, the original benefit.
If you are the primary annuitant then you get paid first, if the survivor annuitant then you get paid once the primary passes away. The payments from a structured settlement annuity are usually free from income-tax and are guaranteed by contract. In deciding upon the date of commencement of payment, how long it should be, and how often is will be, you should consider your monthly expenses, your present age, the extent of occupational hazard, and your retirement plans.
So that the payments remain tax-free, once you agree to the structure of payments, you should not alter them. Other than its tax benefits, another advantage of a structured settlement annuity is that it protects you from having the funds disappear, especially when they are necessary to pay for your future care or needs.
Let’s face it, not everyone is good with money and if you aren’t then having regular payments can help ensure you don’t lose it all in one go. However, you may feel trapped into a structured settlement annuity since once you agree to its terms you won’t be able to change it.
That’s why it is advisable to have a good lawyer and tax accountant to advise you during the negotiation process. A structured settlement annuity is not intended to and do not change your award. It’s a plan that allows for payment of your reward in an installment basis. They are flexible and can be structured to meet your many needs and life circumstances.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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