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Structured Settlement Annuities

Structured settlement annuities are agreements in which your insurance provider pays you a predetermined amount of money for a specific time period in the event of an accident.

Benefits Of Settlement Annuities

The main benefit of settlement annuities is that you are guaranteed money at regular intervals. The money is also free from state and federal taxes as well. Structured settlements also work well for those who do not know where to put or how to spend their lump sum wisely, since payments in this type of annuity are made in small, periodic amounts thus your spending is regulated.

How A Structured Settlement Works

In settlement annuities, payments can be made for the claimant's life duration. These payments may consist of equal installments, lump sums and installments with varying amounts.

In a settlement annuity, the payments are guaranteed by contract and tax free. Structured settlement annuities are designed to grant you long-term security, which is why it is important to know your annuity provider's financial standing.

In a settlement annuity, payment period is entered into the agreement. When deciding the date for your payment and duration to commence, factors such as present age, monthly expenses, risks in occupation and retirement plans are important. Once both parties have agreed upon the payment structure, it should not be changed otherwise the payments will incur taxes. On the other hand, the annuity provider may transfer its payment obligations to a third party in the case of a qualified assignment.

What To Consider Before Getting A Structured Settlement Annuity

If you are looking to get a settlement annuity, there are a number of things that you need to consider. For instance, estate tax still applies for payments intended for an estate, even if they are tax free.

The closing process of a settlement annuity is governed by federal and state laws. Usually, the process is done for about 3-6 months. As stipulated by federal laws, the annuity provider or the annuity holder should obtain a court order in order to avoid tax liabilities. Obtaining a court order is regulated by the Structured Settlement Protection Act. This act is being implemented across 36 states in the US.

Moreover, a disclosure statement should be issued to an annuity holder before s/he receiving the transfer agreement. It is recommended that you get legal counsel if going through the structured settlement process appears unclear to you. In fact, legal representation is a precondition before getting a settlement annuity in some states. However, you can have the option to waive legal counsel through the transfer agreement or by means of an estoppel, which you may get from your lawyer. However, this condition depends on the laws that apply for the transaction.

The annuity provider starts payment 30-45 days after the assignment is acknowledged and the court order is obtained.

Selling Structured Settlement Annuities

Companies purchasing structured settlement buy your annuity for profit purposes. The lump sum you receive for selling a part of, or the complete annuity is not equal to the value of the annuity sold.

In most cases, selling annuity settlements may not be an ideal investment decision. It should only be your last option only if you are confident of handling your investment portfolio competently. When you sell your structured settlement annuity, you are more likely to lose at most half of your annuity's long-term value.

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