What is Structured Settlement?

What Is a Structured Settlement?
This words Structured Settlement is the one famous keywords that has a highest paid and i curios what is the meaning of this thats why i reserached also the meaning and base in the website www.expertlaw.com/library/personal_injury/structured_settlement.html these following information:
Sometimes when a plaintiff settles a case for a
large sum of money, the defendant, the
plaintiff's attorney, or a financial planner
consulted in association with the settlement,
will propose paying the settlement in
installments over time rather than in a single lump sum. When a settlement is paid in this
manner it is called a "structured settlement".
Often the structured settlement will be created
through the purchase of one or more annuities,
which guarantee the future payments. A structured settlement can provide for
payment in pretty much any schedule the
parties choose. For example, the settlement
may be paid in annual installments over a
number of years, or it may be paid in periodic
lump sums every few years. Benefits of a Structured Settlement One significant advantage of a structured
settlement is tax avoidance. With appropriate
set-up, a structured settlement may
significantly reduce the plaintiff's tax
obligations as a result of the settlement, and
may in some cases be tax-free. A structured settlement can protect a plaintiff
from having settlement funds dissipated, when
they are necessary to pay for future care or
needs. Sometimes a structured settlement can
help protect a plaintiff from himself - some
people simply aren't good with money, or can't say no to relatives who want to "share the
wealth", and even a large settlement can be
rapidly exhausted. Minors may benefit from a
structured settlement as well, such as a
settlement which provides for certain costs
during their youth, an additional disbursement to pay for college or other educational
expenses, and then one or more
disbursements in adulthood. An injured person
who has long-term special needs may benefit
from having periodic lump sums with which to
purchase medical equipment or modified vehicles. In some situations, it will be better for a
severely disabled plaintiff to set up a special
needs trust, rather than entering into a lump
sum or structured settlement. Any plaintiff who
is receiving, or expects to receive, Medicaid or
other public assistance, or the guardian or conservator entering into a settlement on
behalf of a disabled ward, should consult with
a disabilities financial planner about their
situation before choosing any particular
settlement option or structure. Potential Disadvantages of Structured
Settlements Some people who enter into structured
settlements feel trapped by the periodic
payments. They may wish to purchase a new
home, or other expensive item, yet be unable
to muster the resources because they can't
borrow against future payments under their settlement. Some people will do better by accepting a
lump sum settlement, and investing it
themselves. Many standard investments will
give a greater long-term return than the
annuities used in structured settlements. Selling a Structured Settlement If you have a structured settlement, you may
have been approached by a company
interested in purchasing your settlement, or
may be curious about selling your settlement in return for a lump sum buyout. About two thirds
of states have enacted laws which restict the
sale of structured settlements, and tax-free
structured settlements are also subject to
federal restrictions on their sale to a third
party. Also, some insurance companies will not assign or transfer annuities to third parties, to
discourage the sale of structured settlements.
As a consequence, depending upon where you
live and the terms of your annuities, it may not
be possible for you to sell your settlement. Keep in mind that companies which buy
structured settlements intend to profit from
their purchase, and sometimes their offers may
seem quite low. You may benefit from
approaching more than one company in
relation to the sale of your settlement, to make sure that you obtain the highest payoff. You
also want to be sure that the company which
wants to buy your settlement is established,
well-funded, and reputable - you don't want a
fly-by-night outfit to obtain the rights to your
annuities but to disappear or go bankrupt before paying you the buyout money. You may
have to go to court to get a judge to approve
the buyout. It is usually a good idea to consult
with a lawyer before entering into an
agreement to sell your settlement. Special Considerations Any person entering into a structured
settlement should be on guard for potential
exploitation in relation to the settlement: Excessive Commissions - Annuities can be highly profitable for insurance companies, and
they often carry very large commissions. It is
important to ensure that the commissions
charged in setting up a structured settlement
don't consume an inappropriate percentage of
its principal. Overstated Value - Sometimes, after negotiating a particular settlement figure, the
defense will overstate the value of a structured
settlement. As a result the plaintiff, in
accepting the settlement, in fact obtains a
significantly lower dollar value than was
agreed upon. Some defendants have nominally paid the full amount of the settlement, knowing
that they would later obtain significant rebates
from the annuity companies they used.
Plaintiffs should consider compariing the fees
and commissions charged for similar
settlement packages by a variety of insurance companies, to make sure that they are in fact
getting full value. A plaintiff may wish to make
it a condition of the settlement that the
defendant will actually pay the full value of the
settlement in setting up the structured
settlement, and that any rebates received by the defendant for annuities included in the
settlement be payable to the plaintiff. Self-Dealing - There have been cases where the plaintiff's lawyer is also in the insurance
business, and sets up a structured settlement
on behalf of a client without disclosing that the
attorney is purchasing the annuities from his
own business, or is pocketing a large
commission on the annuities. Similarly, there have been situations where the plaintiff's
attorney has referred the client to a particular
financial planner to set up a structured
settlement, without disclosing that the financial
planner will be paying the attorney a referral
fee in relation to the client's account. Make sure that you know what financial interest, if
any, your lawyer has in relation to any financial
services sold or recommended by the lawyer. Life Expectancy - It is unfortunate, but many people who receive large personal injury or
workers' compensation settlements will have a
shortened life expectancy as a result of their
injuries. It is important to consider life
expectancy in association with any structured
settlement, and to consider whether it is appropriate to enter into an annuity where
payments will cease upon death. Sometimes it
will make sense to insist upon an annuity that
pays a minimum number of payments, or one
that will pay a balance into the plaintiff's
estate, such that the value of the settlement is not lost to an insurance company upon the
plaintiff's untimely death. Using Multiple Insurance Companies - For larger settlements, it often makes sense to
purchase annuities for a structured settlement
from several different companies, dividing the
settlement between those companies. This can
provide you with protection in the event that a
company that issued annuities for your settlement package goes into bankruptcy -
even in the event that one of the companies
defaults in part or in full on your settlement
payments, you would still receive full payment
from the other companies.