What is a structured settlement?
Origin
Structured settlements were first used in Canada. The first beneficiaries were a group of children who were affected by a birth defect known as Thalidomide.
What are the advantages of a structured settlement?
A structured settlement could in many ways, be a very powerful financial tool. Some of the benefits that it carries are:
• There is guaranteed payments. The amounts are derived from the annuities that were bought to fund the settlements.
• You are offered customized planning with well-trained advisers. They can offer you valuable advice on how to meet your immediate and distant future financial obligations.
• You are provided a 100 percent exclusion from income, dividend and capital gains taxes. The prohibition lasts for a lifetime.
• The risk of losing your cash in investments that are vulnerable in the market is eliminated. The same applies to the risk associated with poor financial management.
• People from private health care and federal health care are qualified to receive this kind of settlement.
Who funds the compensation?
The strongest insurance companies in the country fund the structured settlements. The law requires these firms, to hold on to certain assets that provide a guarantee for the contracts underlying structured settlement.
Reasons why you should consider structured settlements:
The reasons are numerous but here are just a few of them.
• They offer you peace of mind. You can fully focus on recovering.
• You are provided tax-free interests on the money you receive from the settlement.
• They protect you from spending the money too quickly and therefore protect you from a future financial crisis.
• They protect you from the aftermath of bad investments.
• If you happen to die, your next of kin will inherit the remainder of the settlement.
• They are always guaranteed.
• Your structured settlement consultant will not charge you any fee as the consultation fees are paid by the financial institution that will ensure your future payments.
Additional information
Ask any lawyer, insurance professional or court officer who has ever been present during a settlement and he will tell you that those who opt for a one-time cash payment often have nothing left for a short period. It is possible that their judgment is clouded by the numerous changes they have to cope with, and they fail to consider the adverse tax consequences that are associated with some of the investments that they place their money into.
However, if such people had embraced structured settlements, they would have been able to manage their funds in a better way. By adopting this kind of solution, you will have the funds to:
• Cater for the down payments on your house.
• Cater for your medical expenses such as therapy, drugs, and in the case of the loss of a limb, a prosthetic. You will have the money to cater for what is not covered by your medical insurance.
• Have a retirement income.
• Have a replacement or supplemental income.
• Make tuition payments
The list goes on and on.
Conclusion
Structured settlements are the settlement of choice for those who know what they want in the immediate and distant future. Individuals who want to avoid additional stress after an accident mostly choose them.
