For many of us who have been through the Justice system. We know the huge slow churning wheel of time that seems to make many cases takes years to complete and agree upon mutual settlements. The court system can sometimes be a drag and proves to be even more expensive to see through a case than to being awarded a settlement. Many of this has changed with the introduction of Structured Settlements.
A structured settlement is a financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. The increased popularity was due to several rulings by the IRS, an increase in personal injury awards, and higher interest rates. The IRS rulings changed policies such that if certain requirements were met then claimants could have federal income tax waived.] Higher interest rates result in lower present values, hence annuity premiums, for deferred payments versus a lump sum. Structured settlement payments are sometimes called periodic payments and when incorporated into a trial judgment is called a “periodic payment judgment."
A structured settlement is a financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. The increased popularity was due to several rulings by the IRS, an increase in personal injury awards, and higher interest rates. The IRS rulings changed policies such that if certain requirements were met then claimants could have federal income tax waived.] Higher interest rates result in lower present values, hence annuity premiums, for deferred payments versus a lump sum. Structured settlement payments are sometimes called periodic payments and when incorporated into a trial judgment is called a “periodic payment judgment."
What is Structured Settlement Annuities
An Annuity overall is termed as a fix amount of money paid yearly to an individual. Structured settlement annuities are complex contracts or products, paid out to injured parties in lieu of one large lump sum.The payee does not or will never own the annuity, but instead is controlled by the defendants insurance company.Some Types of Annuities
Immediate Annuity
- An immediate annuity provides income right away or at least within a year after you buy it. You plunk down a big lump sum payment, which is also called a single premium, and start receiving an income stream from that money each month. For example, let’s say you receive a life insurance payment of one million dollars after taxes and you want to create a monthly income from investing that money in an annuity.
- The other broad category of annuities is a deferred annuity, where you receive income at a future date. You make one or multiple contributions during the annuity’s “savings phase” and then receive income either as periodic payments or as a lump sum during the “distribution phase.” So it’s similar to a retirement account where you set aside money that you access in the future.
Selling Your Structured Settlement
Why would anyone want their lump sum payment. Well i can think of a couple reasons why some people would prefer to have their lump sum payment than a structured settlement. Suppose you may need to buy or repair a home, start or invest in a business, fund a college education, pay off a debt or invest in something much lucrative than a monthly payment. These are some valid reasons why you’d like to have lump sum in your hands rather than your periodical payments. The process of selling an annuity or structured settlement is not difficult, but it involves you taking the step to sell, deciding how much to sell and going before a judge to approve your request before you will be able to access that lump some cash.After you have made you complete decision on selling your structured settlement, then you will need to follow the simple steps below in order for the sale of your settlement to begin. It will take a little time for the process of sale to complete, most sales of settlement materialize into cash in an approximate time of around forty days (40). You must also remember that every structured settlement purchase transaction is different in its own way due to each state's laws regulating such purchase transactions.
- Shop around to find the best rate on your sale
Companies do everything to make a profit, and buying your Structured Settlement is one way of doing so. There are many companies who offer good deals while there are others who will burn you deep. What is happening is that you are selling future money for now money, so the company is taking an economical risk as in any investment when they buy or broker the sale of your annuity or structured settlement. - Choose the right company and Start your paper work
You must now submit all your documentation which may include, your structured settlement or annuity policy, settlement agreement letter, your application for sale and ID. These important documents are needed to verify payments and also yo ensure accuracy of all pieces of document. - Sale is approved by JudgeAfter the relevant documents are returned and they are fully signed, a local attorney files them with court and after that the court will schedule a hearing. In the court you will be required to justify why the money is needed and you should be in a position to show that you are not putting your and your family’s financial future in jeopardy. Unless there are any problems with your request of transfer, the judges mostly approve the transfer at this stage.
- Collect Your Funds
Once the judge signs off on the sale, you will just have to wait until a check is cut or the funds is wired to your account of choice from the sale of your structured settlement.
Some Structured Settlement Benefits
- Since Many Lump Sump settlements are considered by Law as a form income, and since income is taxable. Funds received from your annuity are tax free as long as the plaintiff is in no control of the funds.
- Persons tend to squander their lump sum payments within a couple of years without properly investing it. Then they will become quite dependent on the government for support after they become penniless. When a structured settlement is agreed on, periodic payments are maintained and controlled through the lifetime of the plaintiffs disabilities.
- Annuities are controlled and managed by professional qualified financial companies and ensures that present ad future expenses are covered. There is special needs planning and contingency plan for any future developments.
- Most states have laws protect annuities and ensures that even if the insurer goes broke. The annuities forthcoming to the plaintiff will be honored.
The Drawbacks in Structured Settlements
- If a plaintiff holds too much control over the structured settlement proceeds, the IRS may look at the situation and decide that the tax break must be cancelled
- A plaintiff may fear that, no matter how the settlement protects against negative economic conditions such as inflation or recession, unknown changes in the economy could make the annuity payments too small.
- Sometimes, an annuity is placed with brokers who do not have sufficient protection for insolvency (when financial obligations outweigh assets).
- Insurance companies are usually reluctant to disclose how much they will have to pay to buy an annuity covering the amount of the settlement. A structured settlement frequently costs insurance companies much less than it would to make a lump-sum settlement. Without this information, however, the plaintiff's attorney may not be able to make a complete assessment of the benefits and drawbacks of a settlement offer.
Structured settlements is a good way of ensuring that money is controlled and payed when needed. it is a way to monitor and control monies awarded to a plaintiff which has become physically challenged due to some form of accident or any other incident. Even though some say structured payments is a way for insurance companies to not pay large sums which is of better value now that slices of that large sum which value depreciates over time. What ever you decision is regarding your structured settlement, ensure that you have legal aid in order to help you make the right and sensible decisions.
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