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Frequently Asked Questions About Structured Settlements Answered

FAQ answers about structured settlements

When you sustain a personal injury, you may feel like your whole future is in jeopardy. Between dealing with medical bills, being unable to work, and not knowing what your future needs and capabilities will be, the situation can become overwhelming quickly. Moreover, you may find that all parties involved—from the person or company responsible to the lawyers on both sides to your friends and family—have their ideas for what actions you should take to protect your financial security. Luckily, we here at Ringler Associates have been helping injured people and their families since 1975, and navigating these considerations is precisely what we excel at. Let’s address some of the most common questions and concerns about structured settlements.

Q: What are structured settlements?

A: When you sustain a personal injury, you are often entitled to monetary compensation from the responsible party to help you care for yourself and fulfill your needs. A structured settlement is a legal structure that allows you to receive that settlement in the form of consistently scheduled tax-free annuity payments over a number of years instead of one lump sum.

Q: Wouldn’t it be better to receive the money upfront, so I have it when I need it?

A: The structured settlement structure is essential because it guarantees tax-free income over time to compensate for costs such as lost wages and potentially rising medical bills. Even under the best of circumstances, such as a lottery win, people often need to manage large, unexpected sums of money and diminish the funds before they can be used to take care of necessities. And a debilitating injury is far from the best of circumstances; you might struggle to estimate how much money you will need in the future to offset the costs mentioned above, which can lead to difficult circumstances such as medical bankruptcy or struggling to pay bills. Structured settlements set up with the help of experienced professionals can help prevent these issues. They still leave you with options if an immediate need for cash arises, such as personal bank loans paid back using annuity payments.

Q: But what about security? Isn’t having cash on hand safer than dealing with the financial markets?

A: With recessions and market volatility in the air, it is understandable that you would be nervous about trusting someone else with your money. However, structured settlements are truly the safest place for your money. They are managed and guaranteed by the highest-rated life insurance companies in the industry. They are regulated by the state and federal governments, which require the life insurance companies to set aside the funds to make the payments. Structured settlements have been in use for 40 years, and in that time, there has never been a failure of structured settlement annuity payments being made.

Q: My brother-in-law is a stockbroker and says he can invest the money for me and make me more. Shouldn’t I go with that option instead?

A: Many people will have suggestions (and sometimes ulterior motives) for what you should do with your settlement; we strongly recommend prioritizing your peace of mind and security over taking risks with money meant to help you protect your future. Structured settlements are the safe option; they don’t require the daily intervention that profiting from a speculative investment can. That being said, if you consider these factors and still believe that your friend or a family member has a good point and is speaking with your best interest in mind, we would welcome the opportunity to include them in the conversation about a structured settlement that is right for you. While we believe any money management contact will leave that conversation agreeing that the guaranteed tax-free income of a structured settlement is the best path forward, we ultimately want what is best for our clients, whatever that may be.

Q: My case is a worker’s compensation case. Are there any additional considerations to be aware of for those?

A: Worker’s compensation cases often involve Medicare set-aside arrangements, in which a certain amount of the settlement (as approved by Medicare) must be set aside and used to pay for related medical care before Medicare begins again to pay for related care. These cases also often involve dealing with the Social Security disability insurance’s worker’s compensation offset, in which the Social Security benefits may be reduced so that the combined amount of workers’ compensation and Social Security disability benefits does not exceed 80 percent of the worker’s average current earnings. These pitfalls can lead to lost benefits for you as the injured party. Luckily, experts in worker’s compensation cases—like the ones at Ringler—are familiar with these factors and work hard to ensure that every benefit is maximized in the final agreement.

Q: I’m interested in a structured settlement agreement, but I want to ensure my family is taken care of. I understand that my annuity payments will be income tax-free while being paid to me, but what if I pass away during the payment period?

A: In the unfortunate circumstance that you should pass away before the structured settlement has fully paid out, the agreement will pass to your beneficiaries income tax-free, but there can be additional estate tax considerations. However, this estate tax burden on the beneficiaries can be alleviated by commutation riders on the structured settlement, which allows some or all of the remaining value of the structured settlement to be paid out to the beneficiary in a lump sum to pay any projected estate taxes.

Q: I am a minor or representing a minor. Is a structured settlement right for us?

A: Structured settlements are particularly well-suited to minors who have been injured since they are the least likely to spend the settlement money with the future in mind and most likely to have future monetary needs to take care of. In fact, in many cases, significant settlements paid to minors won’t even be approved by the courts without a structured settlement in place. When parents or legal guardians learn that these settlements can be used to provide for the child’s education or future mortgage for a first home, they usually agree that a structured settlement is a way to go for a minor.

Q: A structured settlement is a suitable choice for me. What do I do now?

A: Ringler is here to help! If you need personalized assistance with your structured settlement and want to learn more about your options, search for a Ringler consultant near  you by clicking here: Structured Settlement Consultant Near Me

To hear more questions and answers or to stay up to date on the structured settlement industry, subscribe to the Ringler Radio podcast here: Ringler Radio Podcast

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