WHY CONSIDER A STRUCTURE
Advantages of Structuring
Financial Security
A structured settlement provides guaranteed, tax-free income (pursuant to IRC section104(a)(1) and (2), timed to meet the needs of clients. Payments may be guaranteed for a specific time or continue for the client’s life. The return on most other investments from a lump-sum settlement, conversely, is never guaranteed and risk can quickly become an undesired reality.
Tax-free with no administrative or management fees
Not only are all structured settlement payments tax-free, there are no administrative or management fees. In contrast, lump-sum cash settlementsare initially tax-free, but interest earned on invested proceeds is taxable and often face management and administration fees. Even the most sophisticated investors often cannot match the after-tax returns of a structured settlement.
No burden of managing a large
cash settlement
Successfully managing a lump-sum payout involves great risk and mental anguish. Industry statistics note that proceeds from 90 percent of all single lump-sum cash settlements are depleted within five years, often succumbing to both market volatility or the plaintiffs’ investment inexperience. Structured settlements, however, require no investment savvy and eliminate all worry about market conditions. The payout is guaranteed and tax free.
Virtually unlimited flexibility
Structured settlements epitomize flexibility. Designed to meet clients’ specific needs, the tax-free payments can be scheduled for any length of time, even a lifetime. Payments can start immediately or in the future. They can be made monthly, quarterly, semi-annually or annually, even future lump sums in amounts and on targeted dates. If income needs are expected to grow, payments can grow. Clients can even include cost of living adjustments, if inflation is a concern.
Protection for clients and their families
A properly designed structured settlement can provide clients with confidence and security – today and for the future. A structured settlement can be designed to deliver a monthly disbursement for everyday needs – and can provide payments for future obligations, such as for children’s education or retirement – all on a tax-free basis.
Capital protection for minors
Structured settlement payments can protect a child by providing funds at the age of majority and spread the rest over a period of time determined by parents or guardians. Court approval of the settlement is more easily obtained by presenting a well-designed structured settlement.
Estate protection for heirs
During the planning process, clients determine the minimum number of guaranteed payments to be received. If the client dies before all payments have been made, their estate or named beneficiaries may receive all remaining guaranteed payments tax-free and may allow beneficiaries to avoid probate.
Structures are backed by highly-rated insurance companies
The annuity contracts available through NFP Structured Settlements are offered by insurance companies rated A (Excellent) or higher by A.M. Best Company Inc.* These annuities are also subject to strict regulatory requirements, as well as federal reserving guidelines, providing clients with multiple layers of protection.
By law, structured settlements and the timing of any future payments can only be designed and created once. This must occur before the plaintiff accepts any settlement money. Thereafter, the structure and timing cannot be changed. Therefore, it is critical to design and create the most beneficial structure possible. Partner with NFP Structured Settlements before finalizing any settlement agreement.
Learn more about structured settlements:
* An “A” (Excellent) rating is the third highest of the active-company ratings designated by A.M. Best Company. Inc. (“A.M. Best”) ratings for insurance companies range from “A++” to “S.” A.M. Best indicates that “A” (Excellent) ratings are assigned to those companies that in A.M. Best’s opinion have an excellent ability to meet their ongoing obligations to policyholders. A.M. Best’s ratings are not a warranty of an insurer’s current or future ability to meet obligations to policyholders, nor are they a recommendation of a specific policy contract, rate or claim practice. Learn more at A.M. Best.
