What is a Structured Settlement and How Could it Help Me?

Being involved in a “bodily injury” auto insurance claim can be a horribly unpleasant experience.  Unfortunately, due to the speed at which they travel and the physical nature of automobiles, the injuries that can be inflicted as a result in riding in one can be potentially life altering and severe.

It is my sincere hope that you never find yourself afflicted by a severe injury, but if you do, I hope you will remember and take to heart, what you have learned in the reading of this article.

After enduring many months or even years of pain and suffering, most claimants would be tempted to celebrate the conclusion of their injury settlement, by spending a lump sum settlement.  This means that the money, which is meant to make the injured party whole again in some manner, disappears to leave a lasting financial as well as physical debility.  This danger is even stronger in the case of a minor.

Thankfully there is another option, which the Internal Revenue Service has blessed as tax free, for all payments and interest.  The name of this, truly life saving, financial vehicle is a “Structured Settlement”.

Structured settlements have been around since the early 1970’s.  They are agreements between the injured party and/or the injured party’s family and/or heirs to structure the payments made in settlement of a “bodily injury” claim. The vehicle through which these payments are made is a life insurance annuity or annuities.

Some situations where a “structured settlement” is of great value are; (1) a young child has an injury, (2) a working age person has an injury, which limits future income, (3) a person close to retirement age, has an injury, which ends his/her work life or severely impedes it,  (4) an elderly person has an injury, which results in her/him moving into a nursing home, and requiring care through the end of life,  (5) an injury is catastrophic, and requires lifelong treatment or care.

Whether you are involved in a claim for which you have retained an attorney, or are handling a claim directly with an insurance company, you are able to request settlement of your claim, utilizing a structured settlement.  Settling a claim with a structured settlement, does not prevent your receiving up front money to pay bills, or to satisfy a portion of the claim.

There are cases, which require court approval, wherein a structure is required by the judge handing the case.  This is done for the protection of the claimant or claimants involved in the settlement.

Think about all the “friends” or family, who would like to help you part with or spend a large sum of money, and you will see why requesting a structured settlement, can be one of the most important financial decisions you will ever make in your life.

Structured settlements are customized plans, which can involve up front payments, regular payments made in any series of intervals and/or varied payments based upon anticipated needs and, once set up, they are absolutely guaranteed. What is more the interest that accumulates within a structured settlement is completely tax free, even on receipt.

Getting the same “guaranteed” rate of return on a lump sum investment, that you obtain by utilizing a  tax free structured settlement, is quite frankly impossible, for the best financial adviser.  In addition, you do not have to worry about paying fees for someone to manage an investment.

Once a structured settlement is set up, and a legal document called a “qualified assignment” is in place, the insurance company that handled the bodily injury claim is completely out of the picture. Your future dealings are only, with the Annuity Company or companies with which your funds are deposited.  In addition, the Annuity Company your funds are now deposited with is protected by the insurance guarantee fund of the state in which it is domiciled.

“Structured settlements” allow you the benefit of compounding and tax-free income.  They are very favorably viewed by members of the legal profession.  Many attorneys use them to maximize the return on the fees they receive for handling claims/cases.

Here are a few things a “structured settlement “can be used to achieve. (1) Your child has been injured and receives up front money for medical bills, and the pain and suffering monies are set up as a college fund “structure” which pays an equal amount for 4 years from the time your child is 18 through age 21. (2) You are injured and can not work in your usual occupation again. A “structured settlement” is set up, to pay you the difference between the amount you were earning before the accident, and the amount you can now earn as a result of your injury. You are paid this amount every month, for the rest of your working life. (3)  Your husband is injured in an accident and you are close to paying off your mortgage.  After the up front money for attorney’s bills and medical bills is paid out, you structure the remainder to pay the mortgage every month, until it is paid in full. (4) Your mother is injured in an accident, and decides that she would like to use her settlement, to leave a sum of money, for each of her grandchildren, to receive at age 25.

The possibilities for utilizing a “structured settlement “to achieve something positive after a negative event, are endless and only limited by your imagination. You might think of a “structured settlement “ as an opportunity “to make lemonade from lemons”.  A structured settlement broker can help you come up with the best “lemonade” for you and your family.  These professionals are paid, only on the commissions they earn from the annuity or annuities, so their services in helping you come up with your solution, are completely free of charge.

My special thanks to Roger Classen of Atlas Settlement Group Inc, for the generous donation of his time and personal insights, gained in over 25 years of arranging “structured settlements”, for insurance company claims, on behalf of injured claimants and their families.  www.atlassettlements.com