Personal injury settlements are typically structured into lump-sum awards, where the beneficiary receives all the funds at once, and structured settlements.
Under proper construction, structured settlements provide innumerable benefits to the beneficiary, ensuring that the settlement rewards do not vanish rapidly. If the finances are not run properly, they might lead the family into financial trouble.
TAX IMPLICATIONS:
In case of any injury, compensation received is not subjected to tax, but any income generated will be taxable if the earnings are invested. In the case of the structured settlement, the payments are structured over a number of years, and each payment is fully tax-free.
WORKING:
The structured settlement is very flexible. The defendant will send the money to the life insurance company’s subsidiary called an “assignment company.”
The assignment company will buy the annuity from its parent life insurance company, and the assignment company will hold the policy and pay you each month as the contract requires. They are for a longer duration, and while their pay is lower, they are paid for an indefinitely long period of time.
When it comes to putting structured settlements for sale, the most important decision that you will make is whether or not to sell at all.
There are various advantages for the beneficiaries who avail of structured tax benefits.
- The cash for structured settlement payment can protect the person by helping ensure that the settlement award isn’t quickly depleted, which otherwise might land the family into trouble.
- They provide steady income so that the family is saved from making absurd and financially harmful business and investment decisions.
- Structured settlements are tax-free and also more difficult for creditors to access.
With the pros come the cons there are several disadvantages you must look into if you wish to buy a structured settlement.
- If the compensation is received on behalf of the injury, the individual’s family might need to renovate the home to accommodate the person’s disabilities or purchase special equipment.
- The rate of annuity return is fixed when the scheme is purchased, and therefore, the interest rates might not be much favorable in the future due to disproportionate income and changes in the economic structure.
- A structured settlement scheme may prove disadvantageous for public benefits when Medicaid covers the person’s medical needs rather than private health insurance.
There are ways to ensure that the scheme of structured settlements proves advantageous to the beneficiary’s benefits by purchasing the scheme from trusted source companies that buy structured settlements since a good company ensures the amount, how fast you can receive it, and how pleasant the process is.
- Before choosing a settlement payment purchaser, three things to consider are reputation, customer service, and honesty with their quotes.
- The company you choose must work for your interests rather than their own. The company must help you decide how many payments you might want to sell rather than pushing you to sell all of your payments.
- They must encourage you to sell only what you must and provide you with dedicated, individualized services.
Overall you must research the potential companies and view their customer reviews. The quote should be customized as per your needs and goals, and their behavior in the interview tells how happy they would be to assist you in the future.
