Knowledge can show you the way. The settlement planning and management industry is constantly evolving. New government regulations, new standards and practices, and new product options create the need for constant due diligence. For your convenience, we have provided key resources to promote a better understanding of this complex field.
Frequently Asked Questions
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.
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.
If I choose to structure my money, what happens if I die before the guarantee period is over?
Payments will continue each month until the designated time period has ended. Payments will be made to your estate or your beneficiary if you designate one.
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.
John* was in his mid-forties with a wife and three beautiful children. He was gravely injured at work, and the accident left him a paraplegic. With his settlement, Milestone maximized his return on investment by providing him with the right mix of annuities and investments to cover his monthly expenses comfortably, while giving him a significant cash resource available if needed. John’s wife was able to quit her job to take care of John and to spend more time with their family, which is something she had always wanted to do. John’s net settlement had been only $700,000, and with that we were able to set John up so he and his family would be able to live comfortably, and he was even able to retire at age 42.
Alex* was in his early twenties when he fell from a balcony and suffered a traumatic brain injury. As a result, Alex began to deal with severe anxiety and depression. He received a settlement, and the Milestone team stepped in to identify the best plan for him moving forward. We established a trust that pays for all his medical needs, with a Medicare set-aside so he can still get government benefits as well as a monthly prepaid debit card to help him manage his money. His trust also pays for one of the best rehab facilities in the country. Alex is getting the most from his settlement, and his parents have the peace of mind that he has the right financial, emotional, psychological, and physical care.
A Police Officer’s Story
A police officer in his 30s was crossing the street when he was hit and killed by a truck. After receiving a wrongful death settlement, the officer’s wife worked with Milestone to set up a tax-free annuity for her young son, who suffers from spinal muscular atrophy. With the $750,000.00 annuity, the son will receive a combination of lump sums and monthly payments from age 18 to 35. These payments will allow him to get the extra care he needs in the future and cover expenses such as a new wheelchair, a van, and/or a modified home when he becomes an adult.
Sara* was on government benefits when she was injured in a car accident. She was only awarded $100,000 as her settlement, and this was not a sufficient amount of money to sustain her basic living expenses without government assistance long term. Our client was only 35 years old and from her injuries, she was unable to continue working. Milestone consultants recommended that she participate in a pooled Special Needs Trust. Our client was able to cost effectively join the trust and supplement her monthly needs for medical assistance, which was not covered by Medicaid. This allowed her to thrive with a disability while sustaining her government benefits. Sara is now living in a better community where her safety has improved and she can get the medical attention she needs with increased transportation availability.
A Family’s Story
We assisted a family whose minor daughter currently has a medical condition which may limit her life expectancy long-term. Under the usual statute, the child’s funds should be set aside for future use at age 18; however in this case there was a strong possibility the minor would not see 18. The family did not have the means to provide extra medical assistance, home modifications, counseling, and community interaction at the time of settlement. By providing the family with a thorough and a well-constructed settlement preservation plan, the family was able to obtain court approval to have funds available now for the minor’s benefit (when she needs it most), yet also have funds available through deferred growth of investment for the minor’s future.