Questions and answers about structured settlements
Q: What are structured settlements?
A: If you have been involved in a lawsuit related to personal injury settlements, your attorney may suggest that you consider structured settlements. This is when your case involves settling a large amount of money, and often the attorney for the other side will offer a plan for you to receive the settlement amount over a proposed period of time, rather than all of it. at once in a lump sum. Payments can range from a yearly payment over a 10-year period, for example, to perhaps a payment twice a year. The party that is settling with you regarding your personal injury settlements will purchase an annuity that guarantees full payment over time.
Q: Would I benefit from structured settlements?
A: Avoiding a large tax impact can be one of the main benefits of accepting claim payments through structured settlements. When organized correctly, your tax liability with respect to the amount you have received from the personal injury lawsuit settlement may be reduced or, in some cases, may even be tax-free. Someone who has been seriously injured and will have years of ongoing medical care and special needs may benefit from this type of arrangement. In a wrongful death situation involving young children, structured settlements can be used to pay for the cost of future college.
Q: What are the drawbacks of structured settlements?
A: You cannot borrow against future payments on your personal injury settlements. For example, suppose you would like to buy a house. If you receive an annual payment, this may help your income qualifications on the home, but you cannot access the annuity to make a down payment on the property. The amount of return from the annuity may be less than the amount you could receive if you were managing the entire agreement yourself.
Q: Is it true that I can sell my structured settlements?
A: Yes, this can be done many times. There may be laws or restrictions that come into play. Certain insurance companies that handle claim payments may have restrictions on selling to a third party. This may be a scenario where unscrupulous companies are buying a good deal and offering you a low amount, but in exchange for a quick payment. Annuity purchases are not always the best answer and often may need to be approved by the court. At a minimum, seek the advice of your personal injury attorney before entering into an agreement to sell through annuity purchases.