The Settlement Alliance

3 Things You May Not Know About Structured Settlements

3 Things You May Not Know About Structured Settlements

Apr 7, 2017

Structured settlements are one of the top financial tools relied upon by claimants involved in personal injury, wrongful death and workers’ compensation cases. You may have heard that structured settlements are 100% income tax-free and a stable source of long-term income, but there are a few key points you may not know:

#1: The individual involved in the personal injury settlement does not purchase the annuity policy directly. Instead, the defendant (or insurance company) sends the settlement proceeds to an assignment company, which purchases the annuity policy for the injured claimant. The claimant then receives the structured settlement annuity payments based on a pre-determined schedule. By not having constructive receipt of the settlement funds (i.e. the claimant and the claimant’s attorney never touch the settlement proceeds), the claimant is able to take advantage of the beneficial tax treatment under IRC § 104(a)(2).

#2: Structured settlements can be used as instruments to fund other financial arrangements. Not only does a structured settlement serve as an excellent stand-alone financial option for an injured claimant, but there are also certain advantages to using it to fund other financial arrangements, such as special needs trusts and Medicare Set-Asides (MSAs). For claimants on needs-based government benefits, special needs trusts can be a tool to help preserve benefit eligibility, and claimants can use the structured settlement as a tool to keep the trust funded and able to provide for the beneficiary’s needs. In terms of using a structured settlement to fund a Medicare Set-Aside, the structured settlement may allow the beneficiary to retain more of their settlement proceeds over the long run, as opposed to funding the entire MSA up front with cash. In either case, it is important to pay attention to local, state, and federal laws for each type of arrangement.

#3: The rate of return on structured settlements can be comparable to traditional financial investments. While structured settlements don’t have double-digit rates of return these days, they also don’t have overhead fees or annual management costs. That means that in order to match the rate of return of structured settlements, many traditional investments have to make a higher rate of return to offset the money forfeited through fees. What makes structured settlements even more appealing is that the rate of return is guaranteed—try finding that in the open market!

Contact The Settlement Alliance to learn more about structured settlements

We have put together a team of the most experienced legal and financial minds in the nation. For more information about how we can assist with structured settlements, contact us today at 800-464-2500 or info@settlement-alliance.com.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • Liberty Life Assurance Company of Boston
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential