Why Structured Settlements?
A structured settlement presents a unique opportunity for the recipient of a personal injury claim settlement. Sections of the U.S. tax code allow an injured person to receive their entire settlement up front, known as a lump sum, or paid over time, in smaller amounts through a “structured settlement”. Both ways of receiving the money are tax free. The great thing about receiving the settlement in payments over time, the structured settlement, is that the payments are scheduled to meet the injured person’s specific needs. This means the injured person can use a lot of creativity to match the future payments to their future needs related to medical care, lost income, home modifications, retirement planning, or whatever the person may need the money for. The payments can be received annually, semi-annually, quarterly, monthly, or in larger amounts many years after the settlement. The future payments are made by a life insurance company through a type of life insurance product known as an annuity. The life insurance companies used to make the payments are all very safe and secure, so the injured person can feel confident they will get their future payments on time and in full.
Numerous advantages exist for the injured person utilizing a structured settlement:
- Under current tax laws, all benefits on physical injury settlements are income tax-free to the recipient, except for punitive damages. This includes the interest earned through the annuity.
- Settlement benefits are protected from being spent too soon, which unfortunately happens very regularly when the entire settlement is received up front.
- Benefits on non-physical injury settlements are tax-deferred to the recipient.
- A financially strong life insurance company is responsible for the future payments
- Settlement of the claim avoids the uncertainty of a trial.
- Payment plans are tailored to meet claimant’s future needs, including income replacement, children’s education and anticipated medical care.
- There are no administration, management or transactional fees paid by the injured person, nor any fees for the consultation of Arcadia structured settlement experts.
- Guaranteed rates of return for the life of the structured settlement.
- Structured settlements are endorsed by all major disability organizations in the United States.
- In cases where public benefits are affected by Claimant’s assets, an appropriate allocation can be made to a Special Needs Trust so the injured party’s quality of life can be improved with the settlement funds.