STRUCTURED SETTLEMENTS ARE GREAT FOR MINORS

Even the most disciplined 18 year old can blow through a few hundred thousand dollars in a short period of time.    A $100,000.00 boat, a Range Rover Sport, and a few lavish trips could be the end of several hundred thousand dollars, real quick.  A carefully planned and structured stream of payments with a reasonable rate of return on investment built into the structure solves a lot of the problems that come with being 18 years old and cash rich.

The liability insurance company has the option of offering a structured settlement instead of a one time lump sum payment.   The injured party can reject the offer to structure and negotiate on a lump sum basis; but in large money cases, structures usually enter into the negotiation process.

INJURED PARTY SHOULD HAVE HIS OWN STRUCTURED SETTLEMENT ADVISOR/BROKER

In large cases, the insurance carrier usually brings a structure specialist to the settlement conference; or has one available for quotation options. We believe that the attorney for the injured party should involve a structured settlement specialist to ensure the most competitive rates of return are determined by competitive quotations from multiple insurance companies.

Structured settlement specialists should be familiar with medicare set aside trusts, income taxation, medical lien negotiations and a multitude of other technical issues that arise under various circumstances.   They are a great resource for the injured party and his or her attorney. They serve as the broker for a large number of insurance companies and financial companies, who are essentially competing to write the annuity. Different companies offer better yields than others on the same quotation date.

HYPOTHETICAL STRUCTURED SETTLEMENT

Assume a male, 14 at date of settlement agreement in 2015.  Single premium annuity purchased from life insurance company for $200,000.00 by the liability insurance company for the at fault party.

YEAR               AGE         Payment Amount to injured party

2015           14                                       zero

2016           15                                   zero

2017           16                                   zero

2018           17                                   zero

2019           18                           $20,877.60

2020           19                                   $20,877.60

2021           21                                   $20,877.60

2022           22                                   $20,877.60

2023           23                                   $20,877.60

2024           24                                   $20,877.60

2025           25                                   $20,877.60

2026           26                                   $20,877.60

2027           27                                   $20,877.60

2028           28                                   $20,877.60

2029           29                                   $20,877.60 (Last Payment Year)

2030           30                                   zero etc..

TOTAL PAYOUT                                           $250,531.20

Metropolitan Life,  a 2015 quotation, as an example,  courtesy of Michael Gunn, Forge Consulting, Columbia, S.C., an established firm in the area of structured settlements and other litigation related financial planning.    Forge Consulting, Inc.

TAX ADVANTAGES OF A STRUCTURED SETTLEMENT

Provisions of the United States Code specifically exclude from the definition of taxable income, money from settlements for personal injury; and therefore, the a hypothetical would not be taxable, even if paid in a lump sum.   But if the annuity was purchased as a structured payment for lost profits etc..,, not personal injury related, there would be tax consequences that need to be considered.