Structured Settlement Annuity

0 Comments | Rating: 0 | |

Winning a court judgment often includes the option of receiving a structured settlement. Lump sum payments, which are another common form of court case settlements, are often quickly spent by the payee then gone forever. There are also tax burdens to consider when a lump sum is invested all at once. Tax payments on the returns can lower your lump sum award so much that you actually receive less money. Often, a structured settlement annuity is a much better choice if you have won a court judgment.

By accepting a structured settlement rather than a lump sump payment, you will receive your money in installments. The person who owes the judgment amount sets up and purchases the annuity plan usually through an insurance provide to provide you with consistent payments.

Structured settlement annuity payments will provide you with a regular income and will reduce the chances of you spending your entire award quickly. Payments can be received on a monthly, quarterly, or a yearly basis. Structured settlement annuities can also be set up for payment over a fixed time span or the payments can be stretched out to last a lifetime. Payments can also be made after your death to your survivors, which is another advantage to consider. Your family can continue to receive this income even after you pass away, as long as you have set up the structured settlement payments accordingly and you have chosen beneficiaries.

A guaranteed income is the biggest advantage of choosing a structured settlement. Though the individual payments may not seem significant, they can help you budget, save for the future or plan ahead for large upcoming expenses such as a child's college tuition since you will have some consistency and stability to your earnings.

Another aspect to consider is that payments from a structured settlement will not leave you with less money. The fees and costs incurred when an annuity is set up can usually be billed to the defendant. Your settlement amount will not change and the money owed to you will be dispersed over a certain amount of time until you have been paid the amount of the judgment.

There are also tax benefits and savings associated with structured settlement annuity payments to consider on top of the regular income you will receive. A lump sum does result in more cash in hand at the time your case is settled. When a lump sum is taken and the money is invested, however, your investments will produce more income that will be taxed, which is a downside to choosing the lump sum type of settlement. Investments also carry with them a certain amount of risk so it is possible to receive a lump sum, make poor investments and be left with nothing after taxes and losses are accounted for.

Significant tax savings can be incurred by choosing a structured settlement. Annuity payments from a structured settlement related to an injury are not considered taxable income. Before making any important financial decisions you should meet with an experienced tax attorney or an accountant. Professional advice and assistance is very helpful when deciding whether or not to accept a structured settlement.