NFP Structured Settlements

Structured
Settlements

Why You Should Consider One

It can help provide financial security

Simply put, a structure provides guaranteed long-term income. Depending on your needs, payments may be guaranteed[1] for a specific period of time or for as long as you live. Alternatively, the return on most other investments from a lump-sum settlement is not guaranteed, and recent market performance has demonstrated how quickly risk can become an undesired reality.

It Is Tax-Free and Does Not Have Any Administrative or Management Fees

You never pay tax on structured settlement payments. Pursuant to the Internal Revenue Code Section 104(a)(2), the IRS does not consider any distribution from a structure to be ordinary income. Structure payments received by your estate or by your heirs will also be free of income tax. Furthermore, unlike ordinary investments, structures do not involve administrative or management fees. Although lump-sum cash settlements are also initially tax-free, the interest earned on investing that money is usually fully taxable. Furthermore, cash settlements are often subject to management and administrative fees, as well as the Alternative Minimum Tax (AMT). Therefore, every year, the overall return on a lump-sum investment is reduced by taxes and fees, making it difficult for even the most sophisticated investor to match the after-tax return provided by a structured settlement.

It Eliminates the Burden of Dealing with a Large Cash Settlement

A lump-sum settlement requires you and your family to make difficult financial decisions. As you attempt to adapt to a new lifestyle, there is typically little time to become well-versed in the numerous intricacies of money management. As a result, many plaintiffs have lost all or a portion of their settlement proceeds to volatile or speculative investments, taxes and/or management fees — leaving little or nothing to cover future expenses. In fact, several studies have shown that up to 90% of single lump-sum cash settlements are fully depleted within five years, regardless of the size of the award

It Offers Unlimited Flexibility

Structured settlements are extremely flexible and designed to meet your specific needs. Payments from a structure can be scheduled for any length of time, even for a lifetime. Plan designs can include monthly, quarterly or annual payments, as well as future lump sums — in amounts and on dates of your choice. Payments can begin immediately, or at some time in the future (referred to as a “deferral”). If your income requirements are expected to grow over time, you can receive increasing payments by using a Cost of Living Adjustment (COLA).

It Helps Protect You and Your Family

The nature of a properly designed structured settlement provides confidence and a lifetime of secure payments. You may design your structure to include a monthly check to meet everyday needs such as food, clothing, housing and transportation. Your structured settlement can also be used to finance future obligations such as your children’s education, or to provide guaranteed, tax-free income for when you retire.

Capital protection for minors

If the settlement is for a child under the age of majority (a “minor”), the usual alternative to a structure is to have the funds deposited with the court. With this option, all of the money then becomes available when the child attains the age of majority. If you are concerned that your 18- or 19-year-old may lack the financial maturity to handle such a lump sum, structuring offers an effective solution. Structured settlement payments can provide some funds at the age of majority and spread the rest over a period of time that you determine — perhaps assisting with your child's education or supplementing lower earnings during his or her early years in the workforce. Court approval of the settlement is also more easily obtained by presenting a well-designed structured settlement.

Estate protection for heirs

If desired, you may specify the minimum number of payments to be made, whether you are alive or not. For example, a structure can provide lifetime income with a 25-year guarantee[2] period. You receive payments for as long as you live; however, if you die before 25 years of payments have been made, your estate or your heirs may receive the remaining guaranteed payments tax-free. Furthermore, structured settlements let you bypass state probate courts so that there will be no delay in your beneficiaries’ receipt of future payments.

It Is Backed by the Highly Rated Insurance Companies

Payments from a structured settlement are provided by a settlement annuity. Based on our experience, annuities have been the preferred way of funding structured settlements because of their pricing and flexibility. An annuity contract is issued by a highly rated life insurance company that contractually guarantees your payments. In addition, these annuities are subject to strict state regulatory requirements, as well as federal reserving guidelines governing annuity contracts — thereby offering you multiple layers of protection.

A Cautionary Note:

The law only gives you one chance to structure your settlement, and that chance happens before you accept the settlement money.

In addition, the amounts and timing of all future payments are decided at once and usually cannot be changed. That is just one of the important reasons to choose NFP Structured Settlements, so we can help you get the most beneficial structure possible.