A structure annuity settlement is a situation wherein a specific insurance company provides a qualified person with cash installments as payment. Generally, people who qualify for such kind of payments are those who met an accident, experienced construction defect or have other personal injuries. Likewise, a structure annuity settlement can be used in worker compensation cases, guardianship cases, and wrongful death cases. In such circumstances, the claimant is given cash payment on a monthly basis as long as they are alive. At times, the installments of the total amount might be paid through numerous ways, such as lump sum, flat-rate amount or cash settlements.
Pros and Cons of Structure Annuity Settlement
Structured annuity settlements are guaranteed stream of future payments. Originally, such types of payment could only be used in physical injury cases wherein the total receivable amount for damage was excluded from the recipient’s taxable income. Today, it is possible to obtain a structure annuity settlement for cases other than physical injuries without having to pay any income tax with exception of few specific conditions.
A person with a structure annuity settlement can come across several advantages and disadvantages as discussed below:
Pros: According to a research, many individuals who received structure annuity settlements are satisfied with their associated benefits. The main advantage of choosing a structure annuity settlement over a cash payment is that it offers you long-term financial security and protection. Also, these settlements are beneficial to the defendants in a way that they usually do not have to peruse a lawsuit to get a settlement. In the event where you need to approach the court of law for settlement, the amount decided by the court is likely to be less than the amount offered through structure annuity settlement.
These types of payments are exempted from tax hence can be considered highly beneficial for capital growth. For example, a plaintiff can be awarded with a structure annuity settlement and given the option to choose between $1 million lump sum or $2 million in installments over their lifetime. If they pick $1 million as lump sum amount which is though tax free, any interest made on it will be liable to pay tax. With the $2 million paid over their lifetime, on the other hand, they will not be legally responsible to income tax.
Cons – Structure annuity settlements may come up with some disadvantages though they are really insignificant over their advantages. The perceived inflexibility of the structure is often considered the main disadvantage of a structure annuity settlement. It does not allow, for instance, adding your spouse or child’s name to the settlement without having to have a court order in place.
According to some financial experts, another significant disadvantage of a structure annuity settlement is that the cash value of the total payable amount will devalue mainly because of the recent recession of the economy which might affect this too. If you are risk averse, you may decide to generate a higher income by investing the money yourself. Nonetheless, you can also claim that the monthly installments of the settlement payment give you a reasonable route to dollar cost average to your capital outlay.
Selling You Structure Annuity Settlement
While a structure annuity settlement happens to be a great source of financial security for the plaintiff, one can consider selling it to a third party if they are in urgent need of cash and it is going to be some time to receive their next installment. Similarly, some people may find that these small payments are not taking care of their financial needs and so they need to do something extra. If you have the same case, there are a few options, such as taking out a loan or cashing out the settlement that can be chosen for your scheduled payments.
Sometimes, choosing to sell your structure annuity settlement is a better option than borrowing money against these settlements especially when you consider the interest money you would need to pay. Accordingly cashing out the settlement is the best way out to meet your immediate financial need. There are many companies such as factoring companies that buy structure annuity settlement from the claimant and offer a lump sum amount in return. You also have the choice to either sell the entire settlement or just a part of it, depending on your requirements.
Many people choose to cash out their settlements because of unexpected expenses or even without any necessity. Other common reasons could be paying college fees, buying a new house, medical expense, or starting a new business. Regardless of whatever your reason for selling a settlement might be, it is critical to choose the right company to cash out your structured annuity settlement.
Selling Life Contingent Structure Annuity Settlement
You may have been awarded with a structure annuity settlement that is not guaranteed or life contingent wherein the payments are timed in a way that a part of its installments will be continued even after your death. The most discouraging part of this type of settlements is that your beneficiary will not be able to take over the right to receive the remaining payments.
If this is the case and you want to sell your structure annuity settlement, you will need to find a company that has specialized knowledge, necessary training, and trustworthy reputation in the market. With such a company that has a wide network and experience in purchasing such kind of structure settlements you can successfully sell your settlement and get the cash at your earliest.
A structure annuity settlement is a type of financial agreement through which a plaintiff agrees to resolve a claim by receiving a settlement in form of periodic compensation on an agreed schedule. Such types of payment is proven to be a great source of financial security for senior citizens as they get the comfort to spend their retirement years in peace without worrying about financial matters. In case of children being awarded with a structure annuity settlement, the payments can be used for their education costs.