Structured Settlement Agreements
A structured settlement is an arrangement made after a claimant agrees to settle a personal injury claim by receiving periodic payments over time rather than a lump sum of money. This can be advantageous to both the recipient and the payer in regards to taxes. It can also be advantageous to the recipient in that there will be a predictable, consistent, and secure income on an agreed to schedule to rely on.
A disadvantage to a structured settlement is that once the agreement has been made, it cannot be changed. The amount being paid, or the schedule by which it is being paid cannot be changed. For recipients that want or need a lump of money for any reason are not able to access the funds. This is why it is so important to make sure that you are completely happy with the terms of the settlement before you agree to it. You must anticipate what your needs might be in the next 5, 10, or 20 years (or whatever the term of the agreement is), and try to negotiate the terms based on those projections.
What if you want to sell your annuity?
There have recently (within the last 20 years or so) been companies that offer to purchase your annuity for a lump sum of cash. These companies are obviously trying to make a profit and often offer a much lower amount than what the annuity is worth. They will give you the current market value of the money and not what the total of the settlement will be at the end of the scheduled term. For instance, if your annuity will pay out a total of $200,000 over the course of 20 years, a company who offers to purchase your annuity is not going to offer $200,000 for it. In fact, they will likely offer closer to 25% of that and base that amount on the current value of the settlement rather than factor in inflation etc.
This transaction has both pros and cons. If you are in dire need of cash, this can be an asset to liquidate to achieve your needs. However, while the annuity may not be subject to taxes, a cashed out annuity that is invested will be subject to taxes on dividends and interest.
It is also important to make sure you are getting the best deal possible. Shopping around and paying special attention to the terms, fees, and net amount you are receiving is imperative.
Protecting recipients- Why you need an attorney
A majority of US states have laws that regulate the sale of annuities to ensure that recipients aren’t deceived and everything is done appropriately. Whether you are the owner of an annuity and wish to sell it or are looking at a settlement involving an annuity you should have the best representation to protect your interests and ensure that you are getting the best possible deal. Contact Novitzke, Gust, Sempf, Whitley, & Bergmanis today to discuss your case and the best way to move forward. You can call 715-268-6130, toll free at 888-596-6049, or complete the intake form on our contact page.