Structured Settlement & Tax-Free Settlement Accounts
A structured settlement is a financial planning tool available to injured plaintiffs who obtain a lawsuit settlement or jury verdict. Instead of receiving the full monetary award in a lump sum, plaintiffs defer a portion, or all, of the settlement monies according to a predetermined payout schedule. At Milestone, our settlement designs offer a way for injured individuals to maximize their settlement, meet their immediate and future needs, and think strategically about how the end of their lawsuit can be the beginning of accomplishing future life goals.
Benefits of a Structured Settlement
Better Long-Term Planning
A structured settlement eliminates the burden of planning for a substantial lump sum of money from a lawsuit. Although individuals tend to believe they will be able to manage a large sum of cash, studies have found that most people spend 95 percent of their settlement money within the first five years after receiving it. A structured settlement consultant ensures that the proposed structured settlement will meet your immediate and future needs.
There are tax benefits to having a structured settlement. A lump-sum cash settlement from a personal injury lawsuit is initially tax-free, but if you were to then invest that money into traditional vehicles like stocks, the interest earned is fully taxable. However, if you structure your settlement, your future payments from the structured settlement are tax-free.
Structured settlements are customizable to provide assurance, peace of mind, and a lifetime of financial security. A plaintiff may decide to take some of the settlement up front to cover immediate expenses and the remainder in a series of tax-free payments over time to meet future needs. Many people depend on their settlement to pay for daily living expenses. A plaintiff may design his or her structured settlement to include a monthly check to cover food, clothing, transportation, and/or housing – however the monies will be most useful. In addition, structured settlement payments can be used to fund a plaintiff’s child’s educational needs or provide income for when he or she retires. Milestone helps plaintiffs and their attorneys arrive at a plan that is most beneficial for their life, now and in the future.
Tax-Free Settlement Accounts with an Investment-Backed Structure
Milestone’s investment-backed structures are professionally managed with diversified portfolios. Based on typical market performance, earnings on the settlement dollars could be between seven and nine percent. By working with Milestone’s team of expert settlement planners, attorneys can help their clients design an innovative investment plan, with modern tax advantages and higher earnings growth.
Investment-backed structures are a critical component of tax-free settlement accounts, and they can incorporate a combination of:
- Fixed income
- U.S. Treasuries
- Investment-grade corporate bonds
- Dividend stocks
- Private equity
- S&P 500
- Russell 2000 Index
- Fixed-index, traditional, or secondary-market annuities
Milestone’s investment-backed structures provide financial security and long-term income in predetermined increments. These payments are 100% exempt from federal and state income tax, and so is the growth on the account. Key features include:
- Tax-free gains
- Fixed payment schedule
- One-time, no-fee hardship provision
- Automatic default judgement
- National custodian with multiple levels of coverage and protection
- One-on-one initial consultations and ongoing check-ins
- All investment options available
- Daily account management and quarterly reporting
- The ability to incorporate your personal financial advisor into the planning
Watch our webinar below to learn more about when and why to use tax-free settlement accounts.
Correctly mapping out a settlement helps ensure that the recovery a plaintiff receives is as beneficial as possible. This considers future necessities such as medical bills, equipment, long-term care, and other expenses related to the injury. Designing settlement intelligently and holistically gives plaintiffs options to set up the most advantageous financial future with their settlement monies.
The decision to structure a plaintiff’s settlement must be made before accepting the settlement proceeds. Speaking with an expert settlement planner can help you determine your (or your client’s) available options. We welcome you to contact Milestone to learn more.