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HEALTH DISEASES FINANCE
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A structured settlement is a future stream of payments that is paid tax-free to you. Instead of taking all cash at the time of settlement, you have a second option. You can take less cash and a future stream of payments paid by a strong life insurance company. Splitting your award between up front cash and a future stream of payments is called a structured settlement. In a structured settlement, all the future payments are tax-free, saving a considerable amount of money. An example of a future stream of payments is $2,000 per month for life, with a 20 year guarantee (will pay a minimum of 20 years even if person dies prior to 20 years). Congress did a study and found that many people who received large lawsuit awards because of physical injuries lost the money very quickly, usually within 5 years. Besides dealing with the stress of their injuries, many injured people faced the added stress of investment or loan requests from relatives, friends and neighbors. Many discovered that they were made to feel very guilty if they did not help these people out, after all, they were now "rich". A large amount of money can disappear amazingly fast. Many of them could no longer work because of their injuries, and they had now spent all their money on bad loans and investments, they were often forced to turn to public assistance. Congress saw the necessity to protect ordinary, non-professional investors by having the option for long term, very safe investments with good returns. Congress decided to remove all tax obligations for those who took future payments in a structured settlement. By removing your silent partner, the IRS, (who always has their hand in your pocket) the structure option looks very attractive. In essence, Congress wanted to make the long term safe investment so attractive because of no taxes that you wouldn’t want to miss the opportunity. Yes, with over $50 billion in structured settlements since the early 1980’s, the government has lost billions in tax revenues. But it is good public policy because it has helped the truly needy. The government has also saved billions on public assistance to those who would have been broke after a few years. it is available to Only those who are receiving money because of a physical injury. So this is available to less then 1% of the population. Also, those who are injured must purchase the structure at the time of settlement. After the settlement agreement is signed it is too late. maintain some flexibility and still qualify for a Structure Settlement? Let’s say you are looking at a structured settlement that would pay you $3,000 per month for life. Instead you decide to take a second choice that cost the same, and pays you $5,000 per month for 10 years only. The second option would pay you tax free a total of $600,000 over 10 years. You would have more flexibility because you get your money back quickly. However, after 10 years, no more tax-free payments. To maintain access to your cash, you would take advantage of the structured settlement for a shorter period. |
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