Trial Attorney Blog
In any serious injury case involving permanent or lifetime injuries, careful consideration should be given to whether a structured settlement should be part of any settlement of such a case. A structured settlement agreement is a device whereby if the overall lump sum amount can be agreed upon, a certain percentage of it can be set aside and invested in an annuity that will pay benefits over the victim’s lifetime, usually on a monthly basis. Such benefits are extremely important for people who are disabled because it provides them a safety net and allows them to pay rent and other necessary living expenses as they grow older. Particularly in those cases where a victim is incapacitated and unable to work, a structured settlement agreement can provide a lifetime of revenue for necessary living expenses.
One of the main advantages of a structured settlement agreement is that the benefits are not taxable. As an example, if someone were to settle a personal injury case for $500,000.00 and allocate $200,000.00 for a structured settlement annuity, any benefits generated from the structured settlement annuity would be non-taxable. However, if the settling individual were to receive the entire amount in cash and then invested a portion of the money and made the same monthly interest, taxes would have to be paid on the interest earned, assuming that there was enough income otherwise generated to be subject to taxation.
Another benefit of a structured settlement agreement is by placing some of the monies into a long term annuity, the victim does not have access to the cash and therefore cannot be taking advantage of by relatives, friends, spouses or other third parties who might wish to take the monies for their own use. We have seen this all to often in cases, particularly where those coming into large amounts of money are unsophisticated and tenderhearted usually willing to loan the money out to friends that they may never see again. An annuity protects against spendthrift habits and keeps the money for life usually with a 25-year guarantee such that if the victim dies before 25 years, the annuity benefits will be payable to their estate or designated survivor(s).
Anytime a structured settlement agreement is considered, a structured settlement broker with experience should be consulted. These brokers can help find A+ rated companies that can provide a safe haven for the client’s investment. Larger companies can invest the money safely generating the lifetime benefits that will be necessary to protect the victim from destitution. Another important point in these cases is that oftentimes the victims are uninsurable. If they do not qualify for Medicaid or any other government assistance, the lifetime annuity can also provide periodic lump sum payments (say every 5 years) that can be used for future medical expenses.
As set forth above, there are many reasons why the victim of a serious injury case may wish to consider a structured settlement agreement. Obviously, experienced counsel should be consulted with in any serious injury case to consider such a component as part of an overall settlement agreement.