A structured settlement is a set of payments to be made in the future by one party to another as the result of a civil lawsuit judgement. This personal settlement planning tool offers customized income stability in addition to tax advantages. A structured settlement annuity is flexible and is commonly referred to by lawyers and judges as well as structured settlement brokers, consultants and insurance company claims adjusters.
Structured settlements arise out of a negotiation between adverse parties who agree to settle with compromise. Structured settlement payments are made in a negotiated stream of periodic payments that are paid as damages in exchange for release of liability.
To learn more, read on to see the answers to our structured settlement FAQ.
How Are the Payments of a Structured Settlement Determined?
The most common structured settlement FAQ is how the payments are determined for a structured settlement. In most cases, the defendant and plaintiff work with a qualified assignee to negotiate and determine the terms of the structured settlement agreement. During these negotiations, factors including how much the regular payments should be and how long they should be paid for are determined as well as whether the payments should increase over time or be supplemented by larger payouts during certain periods.
Do I Have to Pay the Structured Settlement Company as a Client?
Defendants often purchase an annuity payment from an insurance company in order to remove obligations from their books and to transfer the responsibility for payment to a company that has expertise in managing periodic payments or even lump sums. In this case, a defendant is paying the structured settlement payments as a client to the structured settlement company until the whole amount is paid off.
Are the Structured Settlement Annuities Safe?
Structured settlement annuities are safe and offer substantial security and financial independence while ensuring the settlement award is available to the plaintiff and/or his family. There are other benefits that come alongside structured settlement annuities, including the fact that they can offer guaranteed income for life and payments can be customized to meet the cash flow needs of a plaintiff, including medical expenses, educational expenses, everyday living expenses and even big-ticket purchases. Cost of living adjustments are also able to be built into structured settlement designs, in addition to substandard age ratings, which can reduce the cost of the structured settlement or increase the rate of return which can essentially enhance the payments.
Am I Responsible For Paying Taxes on My Structured Settlement?
In most cases, the answer is no. Structured settlement payments are usually tax-free; however, there are rare cases in which structured settlement annuity payments can be taxable.
The damages that the annuity payments represent determine the taxation of the annuity payments. If the payments represent damages on account of physical sickness, injury or wrongful death, the damages are tax-free. The same applies to workers compensation payments or wrongful imprisonment; however, if the payments represent damages that are taxable, structured settlement payments are also taxable.
Reach Out to Quest Settlements Today to Learn More About Structured Settlements
Structured settlements do offer peace of mind, knowing the money will get to where it needs to be when it is needed in addition to other benefits. Quest Settlements is here to help, offering the most comprehensive financial advisory services and products in the industry, striving to meet the unique needs of claimants and their loved ones. Reach out to us today to learn more about how a structured settlement may benefit you.
