Q: What is Structured Solution?
A: If you have been involved with a lawsuit involving a personal injury settlement, your attorney may suggest that you consider a structured settlement. This is when your case involves settling a large sum of money, and often the other party’s attorney will offer a plan for you to receive the settlement amount over the proposed period of time, rather than all at once. Payments can range from annual payments for 10 years, for example, perhaps a bi-annual payment. The party who settles with you regarding the settlement of your personal injury will purchase an annuity that guarantees full payment over time.
Q: Will I Benefit from a Structured Settlement?
A: Avoiding a large tax impact can be one of the main benefits of receiving a lawsuit payment through a structured settlement. When properly regulated, your tax liability with respect to the amount you have received from a personal injury lawsuit settlement may be reduced, or in some cases may even be tax-exempt. A person who has been seriously injured and will have years of medical and special needs treatment may benefit from this type of settlement. In the case of a wrongful death situation where there is a small child, a structured settlement can be used to pay for future tuition fees.
Q: What Are the Disadvantages of Structured Solutions?
A: You should not borrow against future payments from your personal injury settlement. For example, you want to buy a house. If you receive an annual payment, this can help qualify your income on the home, but you can’t access an annuity to make a down payment on the property. The annuity return amount may be less than the amount you might be able to receive if you managed the full settlement yourself.
Q: Can I Really Sell My Structured Settlement?
A: Yes, this can be done many times. There may be laws or restrictions that will come into play. Certain insurance companies that handle lawsuit payments may have restrictions on sales to third parties. This can be an arena where unscrupulous businesses shop for good prices, and offer you a low amount, but for a quick payout. Annuity purchases are not always the best answer, and often may require court approval. At the very least, seek the advice of your personal injury attorney before making an annuity sale deal.