How Structured Settlements and Annuity
on الثلاثاء، 4 مارس 2014
Structured settlements are used for a variety of reasons.
The most common is to provide financial compensation over an extended
period of time. This could include monetary awards that stem from
lawsuits or to payout lottery jackpot winnings.
Structured
settlements are commonly used to compensate victims of serious
automobile accidents or injuries sustained in the workplace or caused by
the negligence of another such as medical malpractice.
When
monetary awards are provided through structured settlements, recipients
of the funds are referred to as the Annuitant. Payments are guaranteed
through an annuity held by a life insurance company and can be paid
monthly, quarterly, semi-annually, or annually.
Insurance
companies invest annuities to increase Annuitants' financial portfolios.
Annuity payments provided to compensate injury awards are tax-free.
Annuities provided as lottery winnings may be subjected to state and federal taxation.
Considerable flexibility exists when establishing structured
settlements. Payments can be arranged to meet the Annuitant's financial
needs. If Annuitants require special medical procedures, structured
settlements can be arranged to pay additional funds to cover expenses.
Or, if Annuitants will retire within five years, but receives annuity payments
for life, structured settlements can be established to provide
additional funds at retirement. Once structured settlements are in place
terms cannot be changed without court authorization.
The
duration of structured settlements is determined through the courts or
representing lawyers. Medical injury compensation is often settled out
of court. Lottery winnings compensation is regulated by state lottery
boards.
Structured settlement annuities might be paid for a
predetermined time period or for life. However, "life" may actually
refer to a specific number of years based on life expectancy of
Annuitants.
When Annuitants are compensated for a specific
period of time, payments are referred to as 'period certain annuities.'
If Annuitants die before structured settlements are paid in full,
remaining payments can be assigned to a beneficiary.
Annuities
paid for life are referred to as life annuity structured settlements.
Also known as 'period certain', life annuity settlements allow
Annuitants to designate a beneficiary who receives remaining payments in
the event of death.
A less common structured settlement
is known as 'lump sum' annuities. This type of structured settlement
provides a lump sum payment in the future and is well-suited for
settlements involving minor children. The settlement can be structured
as a 'lump sum' which allows transfer of annuity payments to a
beneficiary, or as 'life contingent lump sum' which does not allow
assignment of beneficiaries.
Two additional structured
settlements include 'life annuities' which pay annuities for life, and
'temporary life annuities' which pay consistently for a specific number
of years. With life annuities, Annuitants can elect 'life only' which
offers no provision for assignment of beneficiaries, or 'joint survivor'
which pays one beneficiary for the remainder of their life. Temporary
life annuities end when Annuitants die and do not allow assignment of
beneficiaries.
As you can see, there are many ways to use
structured settlements. If you are entitled to monetary compensation due
to injury or for lottery winnings, consult with a lawyer to determine
which method provides maximum funds and minimal tax consequences.
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