If you’ve been involved in a personal injury, workers’ compensation, or other legal claim, you may have heard the term “structured settlement” come up. But what exactly does this mean, and how might it apply to your situation? In this post, we’ll break down the basics of structured settlements to help you understand this essential financial tool.
At its core, a structured settlement is an arrangement where, instead of receiving a single lump sum payment from a legal settlement, the claimant receives a series of periodic payments over time. These payments are made by an annuity purchased with the settlement funds.
To understand how this works, let’s walk through an example. Imagine you were injured in a car accident and reached a $500,000 settlement with the insurance company. With a structured settlement, instead of getting a check for $500,000 all at once, that money would be used to purchase an annuity from a life insurance company. The annuity would then make a series of payments to you on a schedule, such as $2,000 monthly for 20 years.
Why would someone choose this approach over a lump sum? There are a few key advantages:
As Dave Nikiel, a Ringler Broker, explains, “Structured settlements provide claimants with the stability and security of reliable, long-term income. They allow people to manage their settlement funds better and avoid the risks of getting a large lump sum all at once.”
Of course, structuring a settlement isn’t an all-or-nothing proposition. In many cases, claimants opt to take a portion of their settlement as a lump sum payment while placing the remainder into a structured settlement annuity. This approach offers the best of both worlds: immediate funds to cover any up-front costs or urgent needs, paired with the long-term financial security of guaranteed periodic payments.
If you are considering a structured settlement, working with experienced professionals who can guide you through the process is important. A qualified structured settlement consultant can help you weigh your options, design a payment plan that meets your needs, and connect you with reputable life insurance companies to administer the annuity.
They can also help you navigate more complex aspects of structured settlements, such as how they interact with government benefits like Medicaid or Supplemental Security Income. Because eligibility for these programs is often income-based, receiving a lump sum settlement could disqualify you. However, structuring the settlement correctly may allow you to preserve your benefits.
In summary, a structured settlement is an arrangement where settlement funds are used to purchase an annuity that makes periodic payments to the claimant over time. This approach offers several advantages, including tax benefits, guaranteed income, customization, and funds protection.
If you’re considering a structured settlement, consult with experienced professionals who can help you understand your options and make the best decision for your unique financial situation. With the proper guidance and planning, a structured settlement can be valuable for securing your financial future after a personal injury or other legal claim.
Want to find a structured settlement consultant in your area? Easily search here: Consultant Directory
A customized settlement plan from Ringler considers all the options and can provide hope and a secure future for injured people.
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