Benefits of Structured Settlements
Guaranteed Income for Life For those who need or want protection for longevity risk, or is in their best interest, a structured settlement provides a predictable contractually guaranteed income stream tailored to their needs.. By comparison this cannot be contractually guaranteed with bank CDs, mutual funds or bonds. Even with conservative bonds and CDs , there is always reinvestment risk, even if the bonds or CDs are laddered and held to maturity.
Structured Settlement Payments Are Not Tied to the Volatility of Stocks or other Investment Markets Subject only to the claim paying ability of the insurer, structured settlement payments continue to be paid regardless of market conditions. During the Stock Market Crash of 1987, the dot.com crash in 2000, the post 9-11 swoon and the 2008-2009 financial crisis or Brexit, structured settlement annuitants continued to receive their checks or direct deposits.
One notable exception was Executive Life Insurance Company of New York, which was taken into rehabilitation by the New York State Insurance Department (now Department of Financial Services) in 1991 and was eventually liquidated in 2013. A lawsuit filed on behalf of ELNY annuitants in New York, alleged that the ELNY company's estate was mismanaged by the New York Liquidation Bureau after ELNY was taken over. While that may be true, in our opinion, based on extensive research, 'the writing was on the wall" about ELNY prior to the time the annuity contracts were written.
Structured Settlement Annuity Companies Have Stood The Test of Time
Who backs structured settlement payments? For people who need the security of stable income or have long term obligations, it's comforting to know that at least 5 companies that currently issue structured settlement annuities have been in business since the 19th Century. They are New York Life Insurance Company, Metropolitan Life Insurance Company, Prudential Insurance Company of America, Pacific Life insurance Company, United States Life Insurance Company in the City of New York, Several others are over 100 years old. LIberty Mutual, which backs Liberty Life Assurance Company of Boston, has been in business for over 100 years. United of Omaha has been in business 89 years and National Indemnity Company, a Berkshire Hathaway company, one of 3 Berkshire Hathaway subsidiaries writing structured settlements, has been in business for 75 years. Visit The Structured Settlement Company Museum on Pinterest which chronicles the history of these companies in an interesting collection of photographs, vintage advertisements and other insurance ephemera. See the ads that your parents, grandparents, great grandparents and even great-great grandparents might have seen.
That's part of the reason you see all of those goofy ads on TV and the Internet for companies asking "Do You Have a Structured Settlement?" or "Get your cash now". Investors in so-called structured settlement payment rights believe in the reliability of the payments from the structured settlement annuity issuers, even if such payments may not begin until years down the road, or extend many years into the future.
Tax Advantages of Structured Settlements In a structured settlement, where payments represent damages for personal physical injury or physical sickness, wrongful death or payment for workers compensation, subject to IRC 104(a) such payments are income-tax free. Where structured settlements are used in settlements where the damages are not excluded under IRC 104(a), known as non qualified structured settlements, there are still tax advantages with tax deferral. By comparison municipal bonds may offer some tax relief on interest, but subject the bond holder to other risks as we've seen with a number of well publicized Chapter 9 bankruptcies. Other investments may involve ongoing taxation of income and/or capital gains as well as management and/or transactional fees
Cost of Living Adjustments With Structured Settlements A variety of cost of living adjustments are available. You can go for a fixed percentage increase or an S&P 500 indexed linked structured settlement payment adjustment or no adjustment at all, if you like
Flexible Structured Settlement Contract DesignA structured settlement can be paid to you in a variety of payment modes such as annually, semi-annually, quarterly, monthly, weekly, every X years to match up to your specific needs. A single structured settlement contract can be used to provide multiple payments of different amounts at different times. With a standard annuity you would likely need to buy separate contracts for each cash flow and possibly incur additional policy fees.
Can a Structured Settlement Help Me If My Case Does Not Involve Personal Injury, Wrongful Death or Workers' Compensation?
A structured settlement is a tremendous benefit to plaintiffs in employment lawsuit settlements, intellectual property lawsuit settlements and other legal matters where there are taxable damages. A structured settlement using a non qualified assignment, or periodic payment reinsurance/reinsurance structured settlement (if the defendant's insurer is paying), permits the plaintiff to have a customized income stream and pay taxes when the payments are received not when the structured settlement is funded. Without a structured settlement, a plaintiff with taxable damages and a $1 million settlement could have the nauseating feeling of seeing their settlement immediately eroded by two-thirds between attorney fees and taxes. Don't get bowled over by taxes!