What is a Structured Settlement Annuity?
A Structured Settlement Annuity (SSA) provides tax-free, periodic payments over a period of time, specifically designed to meet an injured party’s needs. Specialized consultants facilitate the settlement process, as well as help design and negotiate the structure.
Why choose a Structured Settlement?
- Features customized design: Payments are specifically tailored to meet the injured party’s particular financial needs over a defined period.
- Emphasizes stability: Payments are designed to help meet the claimant’s current and future financial needs.
- Promotes security: Structured settlement provide the dependability of a highly rated financial institution.
- Leads to faster settlements
- May reduce costs
- Avoids Jury trials
- May allow for tax deduction (self-insured)
Encouraged by the U.S. Congress since 19821, structured settlement annuities (“structured settlements”) can offer an income-tax-free investment opportunity to plaintiffs in connection with a wrongful death, personal injury2, and/or workers compensation settlement or verdict.
Designed by the plaintiff and tailored to meet his or her future needs, a structured settlement is created through an agreement between a plaintiff and a defendant whereby all or a portion of a settlement is paid to the plaintiff in the form of periodic payments rather than in one lump sum. A structured settlement may be agreed to privately (i.e. in a pre-trial settlement or mediation agreement), or it can be made pursuant to a court order, which often occurs in judgments involving minors.
Structured settlement payments are guaranteed3 and backed by highly rated and regulated life insurance companies. These secure, income-tax free payments are not subject to market fluctuations and provide for surprisingly high rates of return. The U.S. Congress amended the federal tax code in an effort to encourage structured settlements by explicitly providing that money received on account of a personal physical injury through a structured settlement annuity is 100% exempt from income taxation4. This exemption includes both the original amount invested and any interest earned on it over time. The combination of security and tax-exempt status and the ability to achieve investment yields that are typically associated with far riskier investments makes the structured settlement a key component of any settlement plan.
Call Forge Consulting today to learn more about structured settlements.