What is a structured settlement?
A structured settlement is an innovative method of compensating injured parties. It is a voluntary agreement between the injury victim and the defendant or insurer, wherein the victim receives a lump sum of money structured into tax-free payments to be distributed over a period of time. A structured settlement may be agreed to privately (for example, in a pre-trial settlement) or it may be required by a court order, which often happens in judgments involving minors.Learn More
What is the history behind the structured settlement?
Damages paid as a result of a personal injury lawsuit have historically been issued in a single lump sum. This demands a level of financial decision making that most people are not experienced or prepared to make, and creates a complex responsibility that could encumber an injury victim or family. To protect the injury victim, Congress passed legislation that amended the federal tax code. The Periodic Payment Settlement Act of 1982 (Public Law 97-473) formally recognized and encouraged the use of structured settlements in physical injury cases.
Why should I consider engaging a settlement planner?
The benefits of settlement planning are numerous, and with the proper tailored solutions, a financial plan can provide the claimant with:
- Tax-free payments distributed over time
- Steady income to meet ongoing medical expenses
- Funding for future goals, such as a college education or a down payment for a home
- Relief from financial burdens
- Long-term financial security
What kind of flexibility do I have in setting up a financial plan for my settlement?
As the plaintiff, you help direct the type of plan that Milestone will help build and implement for your financial future. Based on your settlement amount, your current and future medical needs, your goals, and much more, we will work with you to tailor the best fit for you. It is important to note that a combination of concepts can be used, such as placing a small amount in a trust and the balance in a structure.
Am I better off with an investment advisor who promises a higher overall rate of return?
It is very unlikely. If you gave the cash to an investment adviser, s/he has to guarantee an after-tax return higher than the insurance company. This is due to the taxes and ongoing management fees that will need to be paid and deducted from his/her program. A structured annuity has no annual fees that reduce returns. Also, keep in mind that only life insurance companies can offer life payments.
Can I use my regular attorney for planning my settlement?
The settlement planning process requires a completely different skill set. Your attorney is trained in getting you the best decision they possibly can on your case. Once that goal is achieved, other skills are required to help you move forward. A knowledge base rooted in law (specifically tax law), government benefits and regulations, and financial planning is required to help develop a plan that optimizes your settlement.