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Structured Settlement
– Guaranteed Income for those with Disabilities
by Charles Essmeier
Up until twenty years ago, anyone who won a lawsuit as a result of a
claim involving worker’s compensation, wrongful death or accident had
to accept a lump sum payment as their compensation. The payment would be
intended to be invested, with the beneficiary living off of the proceeds
for as long as their recovery was expected to take. In many cases, this
type of settlement works fine, but in other cases, the results are a
disaster.
It is difficult enough for someone who has been through the trauma of an
accident or illness to have to adjust to a new lifestyle without having
to also become an expert in the art of financial investing. If you have
been active all of your life and you suddenly find yourself in a
wheelchair and having to handle assets of several hundred thousand
dollars or more, you could be overwhelmed. You could hire someone to
handle the investments for you as well as the tax issues, but what if
the person you hired wasn’t trustworthy? What if you hired a greedy
relative who took all of the money? What if you hired someone
incompetent?
These problems, and statistics that show that people who receive large
sums as compensation for accident, injury, or wrongful death often spend
all of their money in a short period of time, led to Congressional
action in 1982 that amended the Federal tax code to allow for structured
settlements. A structured settlement is simply an agreement between
the responsible party and the injured party that the payments will be
made over time, rather than in a lump sum. The two parties reach an
agreement, the party responsible for payment purchases an annuity,
usually through an insurance company, and the injured party will receive
steady income over a period of years or even a lifetime.
The payments are adjusted for inflation; the sum of all of the payments
will be greater than if the amount had been paid as a lump sum. Because
the payments are purchased up front as an annuity, the paying party
actually pays less than the sum of the payments, as well. The result is
generally a win-win situation, with the injured party receiving a steady
stream of income over as long a period of time as necessary, while the
paying party does not have to worry about making monthly or annual
payments.
While a structured settlement is not the ideal payment arrangement in
all situations where a long term injury settlement occurs, it does work
well in many cases where a lump sum payout might be undesirable.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of
Retro Marketing, a firm devoted to informational Websites, including http://www.StructuredSettlementHelp.com/
and http://www.HomeEquityHelp.net/ |