what's a structured settlement

What is a structured settlement, and how does it work?

• An heir of the recipient can continue to receive tax-free payments in the event of the recipient’s death.
• Structured settlements don’t fluctuate with the market, unlike stocks, bonds and mutual funds.
• A structured settlement can yield more than a lump-sum payout from the interest your annuity earns over time.

More items...

Why do I need a structured settlement?

• Structured settlement payment streams offer a wide range of flexible payout terms. However, they are rigid once the contract is set.
• In total, a structured settlement contract often yields more than a lump-sum payout would because of the interest earned over time.
• A structured settlement payout differs from cashing out an existing payment stream.

What is a structured settlement and should you choose one?

The plaintiff can decide to get a lump sum payment or opt for a structured settlement. What is a structured settlement, and should you choose one? Here’s everything that you need to know about structured settlements. What is a Structured Settlement? With that said, a structured settlement is a payment made by the defendant in an annuity. Structured settlements are typical in civil cases including:

Should you accept a structured settlement?

Yes, accept a structured settlement if the sum you're receiving is large (something around $150,000 or more). However, when dealing with small or medium-sized settlements – less than $150,000 – you should opt for a one-time lump payment instead. There are two reasons why it makes sense to accept structured settlements for large sums.

What is considered a structured settlement?

Allowed by the US Congress since 1982, a structured settlement is: A completely voluntary agreement between the injured victim and the defendant. Under a structured settlement, an injured victim doesn't receive compensation for his or her injuries in one lump sum.

Are structured settlements a good idea?

The best reason to support structured settlements is to have payouts of income to last throughout the beneficiary's lifetime. With guaranteed payments, there is less chance of losing principal to poor investments, spendthrift habits or the undue influence of family and friends.

Why would you get a structured settlement?

Structured settlements are meant to provide long-term financial security to the injured party. If the amount of money is small enough, the wronged party may have the option to receive a lump sum settlement. For larger sums, however, a structured settlement annuity may be arranged.

Can you get money from a structured settlement?

Put simply, a structured settlement is not a loan or a bank account, and the only way to receive money from your settlement is to stick to your payment schedule or sell part or all of your payments to a reputable company for a lump sum of cash.

What is a disadvantage of a structured settlement?

A major drawback of a structured settlement is that it may jeopardize the beneficiary's eligibility for public benefits, which may be particularly problematic when the person's medical needs are covered by Medicaid rather than private health insurance.

Do you have to pay taxes on structured settlement?

Under a structured settlement, all future payments are completely free from: Federal and state income taxes; Taxes on interest, dividends and capital gains; and. The Alternative Minimum Tax (AMT).

What is better a lump sum or structured settlement?

Structured settlements can save you on taxes versus a lump sum, and for many people work as a form of income or annuity every year. Structured settlements can work in many instances. But they may be less than advantageous in others.

How long does a structured settlement last?

If you receive a structured settlement instead of the $300,000 cash, you'll get payments over a term of years or your lifetime (however you choose), and each payment is fully tax free. Thus, a structure converts your after-tax earnings into a tax free return.

Are structured settlements safe?

MYTH #2: Structured settlement returns are dependent on market conditions. Structured settlements are one of the safest, most stable investments on the market. The rate of return is locked in when the annuity is purchased, providing the claimant with a reliable investment, regardless of how the market fares.

What to do with a $100000 settlement?

What to Do with a $100,000 Settlement?Sort Out Tax Implications.Find a Financial Advisor.Pay Off the Debts.Invest in a Retirement Home.Start a Business or Help Friends and Family.Donate the Money to the Needy.Final Words.

Can you use a structured settlement to buy a house?

In short, structured settlements can be an excellent proof of income to mortgage lenders. As long as you can document that you are receiving payments and that your payments are going to last a while, it should be accepted.

What percentage do structured settlement companies take?

9% to 18%How Do Structured Settlement Purchasing Companies Make Money? Factoring companies generally take anywhere from 9% to 18% to cover their operating costs and turn a profit.

Are structured settlements safe?

MYTH #2: Structured settlement returns are dependent on market conditions. Structured settlements are one of the safest, most stable investments on the market. The rate of return is locked in when the annuity is purchased, providing the claimant with a reliable investment, regardless of how the market fares.

What percentage do structured settlement companies take?

9% to 18%How Do Structured Settlement Purchasing Companies Make Money? Factoring companies generally take anywhere from 9% to 18% to cover their operating costs and turn a profit.

How long does a structured settlement last?

If you receive a structured settlement instead of the $300,000 cash, you'll get payments over a term of years or your lifetime (however you choose), and each payment is fully tax free. Thus, a structure converts your after-tax earnings into a tax free return.

Is JG Wentworth a ripoff?

Is JG Wentworth Legit? Yes, this is a legitimate financial services company founded in 1991. JG Wentworth offers structured settlement payment purchasing, debt relief services, and annuity purchasing. The company has an accredited BBB profile with an A+ rating.

What is a structured settlement and how does it work?

Structured settlements are periodic payments made to a plaintiff who wins or settles a personal injury lawsuit. Instead of receiving a lump sum of...

Where can you sell your structured settlement payments?

You can sell your structured settlement payments to a reputable factoring company, otherwise known as a purchasing company. It is important to do y...

What is the difference between a structured settlement and an annuity?

A structured settlement follows a court process, and it is a stream of payments determined through negotiations between a plaintiff and a defendant...

How much does it cost to sell a structured settlement?

Selling a structured settlement is not a dollar-for-dollar exchange. The purchasing company will charge a discount rate, which typically ranges bet...

How Do Structured Settlements Work?

Legal settlements can be paid out in a one-time lump sum or through a structured settlement where periodic payments are made through a financial product known as an annuity. The key differences between these settlement options are in the areas of long-term financial security and taxes.

Why is structured settlement more than lump sum?

A structured settlement often yields, in total, more than a lump-sum payout would because of the interest your annuity may earn over time.

What happens when a plaintiff receives a lump sum settlement?

When a plaintiff receives a settlement through a one-time lump sum, they might spend it too quickly, robbing them of the long-term financial security that future payments could provide. Moreover, any interest and dividends earned if the lump-sum were to be invested would be subject to taxes.

How are legal settlements paid?

Legal settlements can be paid out in a one-time lump sum or through a structured settlement where periodic payments are made through a financial product known as an annuity. The key differences between these settlement options are in the areas of long-term financial security and taxes. When a plaintiff receives a settlement through ...

What are the pros and cons of structured settlement?

Structured Settlement Pros and Cons 1 Payments are tax-free. 2 In the event of the recipient’s death, the beneficiary can continue to receive tax-free payments. 3 Payments can be scheduled for almost any length of time and can begin immediately or be deferred for as many years as requested. They can include future lump-sum payouts or benefit increases. 4 Spreading out payments over time can reduce the temptation to make large, extravagant purchases and guarantees future income. This is especially helpful if the recipient has a medical condition that will require long-term care. 5 Unlike stocks, bonds and mutual funds, structured settlements do not fluctuate with market changes. Payments are guaranteed by the insurance company that issued the annuity. 6 A structured settlement often yields, in total, more than a lump-sum payout would because of the interest your annuity may earn over time.

What is the role of a judge in an annuity sale?

The role of the judge is to decide if the sale is in the best interest of the annuity owner. Other rules may apply depending on the details of your annuity contract and the laws of the state where you live. The Structured Settlement Protection Act of 2002 provides federal guidelines on such transactions.

What was the purpose of the National Structured Settlements Trade Association?

By 1985, the National Structured Settlements Trade Association formed to preserve and promote structured settlements to injury claimants through education and advocacy.

What is structured settlement?

Structured settlements are used by courts in many different types of cases to replace or supplement income that was lost through the fault of someone else. Since they’re conducted by a third party, it also means someone doesn’t consistently need to associate with the person or entity that wronged them.

How much money is issued in structured settlements each year?

It’s a solution that many people take advantage of: Nearly $6 billion in new structured settlements are issued each year, according to the National Structured Settlements Trade Association.

Why were structured settlements first issued?

Structured settlements were actually first issued after children were born with severe birth defects because of exposure to the drug Thalidomide in the womb.

Why are cases settled?

Cases are often settled which award a significant amount of money to a minor in the form of a series of payments to cover the living expenses of a child. Such cases are often won because the plaintiff is able to demonstrate that the child’s life will be irrevocably changed for the worse.

When a party is deemed at fault in the death of a parent, a wrongful death case can?

When a party is deemed at fault in the death of a parent, a wrongful death case can emerge which results in a structured settlement.

When was the Periodic Payment Settlement Act passed?

Congress passed the Periodic Payment Settlement Act in 1982, which streamlined the use of structured settlements in personal injury lawsuits. The legislation shielded structured settlement payments from federal, state and local income taxes.

Does structured settlement affect Medicaid?

The structured settlement issuing companies function in a manner that shields owners as well. Structured settlements don’t affect an individual’s ability to qualify for other forms of aid. Meaning, if someone is set to receive a settlement, the money they receive from it does not affect their ability to qualify for Medicaid, Social Security and other disability benefits.

What is structured settlement annuity?

A structured settlement annuity allows individuals to receive tax-free payments over time. Learn how structured settlements work and when they're used.

Why do we need structured payments?

Receiving structured payments can make it easier to manage recurring medical expensesor other costs associated with an injury.

What happens if you withdraw money from a settlement?

Withdrawing money from a structured settlement prematurely could result in tax penalties and you may also pay surrender fees.

Can you receive more from a structured settlement than a lump sum?

It’s possible that you may receive more from a structured settlement than you could through a lump sum payoutwhen interest is factored in. While a lump sum may be attractive, there may be a temptation to spend the money unwisely. And even if you choose to invest it, you still run the risk of losing money if those investments don’t pay off.

Who can work with the defendant and the plaintiff?

A qualified assignee can work with both the defendant and the plaintiff to negotiate the terms of the structured settlement. Specifically, both sides will need to agree on:

Can annuity payments be tailored?

Annuity payments can be tailored to fit the recipient’s lifestyle and needs.

Is structured settlement tax free?

Structured settlement agreements can be beneficial for individuals who are on the receiving end of these payments. Again, this is tax-free compensation so you don’t have to worry about payments affecting your tax liability. And if you’ve named a beneficiary for a structured settlement annuity, that individual could continue receiving tax-free payments after you pass away.

What is a structured settlement company?

A structured settlement company, also referred to as a factoring company, purchases all or a portion of structured settlements or annuity payments in exchange for a lump sum of cash at a discounted rate.

What happens if you sell a structured settlement?

If a client decides to move forward with the structured settlement or annuity sale, a claim will need to be made in a state court. If the sale is approved, the buyer will pay the agreed amount to the client in exchange for any future payments.

How do Structured Settlement Annuities Work?

A structured settlement agreement governs the terms of the structured settlement. A structured settlement annuity is a contract that details the terms including the total amount due by the defendant. An annuity can be purchased from a life insurance company by the defendant. This enables the defendant to remove any obligation from their own books, transferring the responsibility for payment over to a company that has experience in managing periodic structured settlement payments.

How do plaintiff and defendant work together?

The plaintiff and defendant work together with a qualified assignee to determine the structured settlement agreement terms, including how much the total payments will be and how often they will be paid, as well as any other pertinent details pertaining to frequency and duration of payments.

How does a defendant benefit from a faster resolution process?

The defendant may benefit through a faster and more efficient resolution process, with potential for a reduced cost of prolonged litigation. The defense may also feel more secure by knowing all future payments will be met by assigning payment obligations to a financially sound third party.

What happens when a plaintiff sues the defendant?

The plaintiff first sues the defendant to pursue compensation for an injury, illness or death caused by the defendant. Oftentimes the defendant will agree to compensate the plaintiff through a structured settlement (sometimes to prevent the case from going to trial). If the case does make it to trial, the judge may force the defendant to set up a settlement.

Where are quest settlements located?

Quest Settlements® is a leading provider of structured settlements with locations in Los Angeles, San Diego, and Nevada. Get in touch with us right now.

What happens if you receive a structured settlement?

Thus, a structure converts your after-tax earnings into a tax free return.

Why are structured settlements better than other forms of tax deferral?

Structured settlements are tax efficient and can have asset protection and spendthrift advantages too. Like other tax deferral ideas, their results are more impressive the longer their term and the slower they pay out. They aren't for everyone, and you shouldn't structure every nickel you receive.

Is structured settlement flexible?

Thus, structured settlements are very flexible. Provided that you consider these issues before signing a settlement agreement in your case, you can structure as much or as little as you want and take the rest in cash. With all of this, though, they have to be set up properly. Mechanics.

What is a Structured Settlement?

Structured Settlements are an innovative method of compensating injury victims. Allowed by the US Congress since 1982, a structured settlement is:

Why are structured settlements beneficial?

Structured settlements have the support of attorneys, legislators, judges and disability advocates because they have seen first-hand what happens to injury victims whose financial security has eroded due to unforeseen circumstances.

What happens to an injured victim in a structured settlement?

Under a structured settlement, an injured victim doesn't receive compensation for his or her injuries in one lump sum. They will receive a stream of tax-free payments tailored to meet future medical expenses and basic living needs.

Why are structured settlements considered a safety net?

Structured settlements are viewed as a safety net to provide peace of mind to individuals for long-term financial security.

What is reinsurance contract?

Our reinsurance contract allows the insurer relief from their workers’ compensation liability and from the administrative burden of managing the open case file and sending periodic payments.

Is structured settlement income tax free?

In recognition of the value of providing a stable income stream for injury victims, Congress has made structured settlement earnings tax-free. That’s right - tax-free.

Is American General a structured settlement company?

American General is highly-rated by the rating agencies for financial strength and is part of Sun America Financial Group, one of the largest insurance companies in the world. We are an industry leader in structured settlements, not only are we one of the first companies to write structured settlements but we have written more premium than any other company. Our customer service area services more than 60,000 structured settlement annuitants annually.

Who is involved in a structured settlement?

The process of settling a civil case through a structured settlement involves the person who has been wronged (the plaintiff), the person or company who caused the harm (the defendant), a consultant experienced in such cases (a qualified assignee) and a life insurance company.

What are the pros and cons of structured settlements?

Structured Settlements Pros and Cons 1 Structured settlement payments do not count as income for tax purposes, even when the structured settlement earns interest over time. 2 Income from structured settlement payments also does not affect your eligibility for Medicaid, Social Security Disability benefits or other forms of aid. 3 In the event of the recipient’s premature death, the contract’s designated beneficiary can continue to receive any future guaranteed payments, tax-free. 4 Payments can be scheduled for almost any length of time and can begin immediately or be deferred for as many years as requested. They can include scheduled lump-sum payouts or benefit increases in anticipation of future expenses. 5 Spreading out payments over time can reduce the temptation to make large, extravagant purchases, and it guarantees future income. This is especially helpful if you have a medical condition that will require long-term care. 6 Unlike stocks, bonds and mutual funds, fluctuations in financial markets do not affect structured settlements. 7 The insurance company that issued the annuity guarantees payments. Even in the unlikely event that the insurance company becomes insolvent, your state’s insurance guaranty association still protects you from loss. 8 A structured settlement annuity contract often yields, in total, more than a lump-sum payout would because of the interest the annuity may earn over time.

Why is a structured settlement annuity more than a lump sum payout?

A structured settlement annuity contract often yields, in total, more than a lump-sum payout would because of the interest the annuity may earn over time. Cons. Once the terms of a settlement are finalized, there’s little you can do to alter them if they do not meet your needs.

What happens if a case goes to trial?

If the case does go to trial and the judge rules in the plaintiff’s favor, the defendant may then be forced to set up a settlement. The defendant and the plaintiff work with a qualified assignee to determine the terms of the structured settlement agreement — that is, how much the regular payments should be, how long they should continue for, ...

Why do plaintiffs sue?

The plaintiff sues the defendant to seek compensation for an injury, illness or death the defendant caused. Often the defendant agrees to give money to the plaintiff through a structured settlement in order to keep the lawsuit from going to trial. If the case does go to trial and the judge rules in the plaintiff’s favor, the defendant may then be forced to set up a settlement.

Which settlement option has the most freedom?

Lawsuit Payout Options: Lump sum settlements come with the most freedom and the most risk. Structured settlements, on the other hand, are flexible to set up but rigid once established.

Why spread out payments over time?

Spreading out payments over time can reduce the temptation to make large, extravagant purchases, and it guarantees future income.

What is structured settlement?

Structured settlements are a series of payments that opposing parties agree to arrange on your behalf which pays out over a period of time.

What happens before structured settlements take place?

Before a conversation around structured settlements takes place, an unfortunate event unfolds for a victim. These events vary but usually come about via a vehicle accident, a fall, or other unsafe conditions encountered at a workplace or a business.

How much do structured settlements grow?

Growth is slow, much like inflation, so don’t expect any growth of your payments to exceed 2% to 3% per year.

Why do people sell settlements?

Selling settlements gives victims access to immense amounts of cash, quickly. As a drawback though, selling settlements ruins paced payments that could have insured a victim’s long-term stability. Furthermore, anybody that buys your settlement will do so at a discount so they can turn a profit.

Why do life insurance companies settle?

There’s a reason why life insurance companies get involved in the structured settlements process. They offer more stability in their ability to pay out over long periods of time (for example, 50 years). After all, an individual that’s being sued could very well choose to disappear 5 years or so into their payment arrangement.

What is the best resource when it comes to understanding the ins and outs of your settlement?

At the end of the day, your best resource when it comes to understanding the ins and outs of your settlement is your attorney. Make sure you keep them close as you move through your process of earning settlement dollars. Be vocal if an aspect of the deal that’s being pursued doesn’t make sense to you.

What happens if you get injured and have a financial impact?

If the fallout from an injury is going to have a financial impact on a victim’s life, they may feel the need to pursue their right to compensation. That results in a lawsuit.

The Structured Settlement Process

• The process of issuing a structured settlement is a complicated one that results in a simpler, easier solution for someone who wins a case. If in a court proceeding a plaintiff is determined to be owed money, a structured settlement can be considered instead of a lump sum. Both sides work with a trained consultant to determine the amount of money a...

See more on structuredsettlements.com

How Structured Settlement Issuing Companies Work

Your Right to Sell Structured Settlement Payments

Structured Settlement Laws and Regulations

Structured Settlements and Minors