What are the options for structured settlement benefit payments?
Structured settlement payment options are many and can address the unique and particular financial needs of any Plaintiff or Payee. The table below shows the types of customizable cash flows can be paid directly to a Plaintiff or Payee, to a trust (such as a settlement preservation trust, special needs trust, pour over trust, Medicare Set Aside trust, memorial fund, scholarship fund, or other recovery management trust). A structured settlement can be designed to incorporate one or more of these types of cash flows in a single contract. If desired, Payments can be made by ACH or electronic funds transfer, directly to the bank account of the Plaintiff, Payee, law firm or attorney ( if attorney fees are being structured).
| Income for Life Annuities | that provide lifetime guaranteed structured settlement income and maintain the Plaintiff or Payee's current standard of living. Depending on the annuity issuer, structured settlement payments may be made weekly, bi-weekly, monthly, quarterly, semi-annually, annually, every other year, temporary life or other payment modes. A death benefit (also known as a certain period or guarantee period) can be associated with the payments so that benefits will be paid for the certain period whether or not the Payee survives the entire payment schedule. For example a quote of $4,000 per month for life with 30 years certain means that payments will continue for 30 years (360 months) or the life of the Payee, whichever is longer. |
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Deferred Lump-Sum Payments |
that can be made at pre-determined time periods for special funding needs such as college education, future medical costs, retirement planning, reinvestment and as a hedge against inflation. Lump sums can be guaranteed (most common) or life contingent. |
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Step Annuities |
provide structured settlement income that incorporates graduated increases over the initial payment amount for a fixed period and/or lifetime. |
| Percentage Increase Annuities | like Step Annuities, provide graduated increases over the initial payment amount by using a fixed percentage to provide annually increasing income as a protection against inflation. |
| Index Linked Structured Settlements | Future periodic payments will increase annually based on positive changes in the Standard & Poors 500 (S&P 500) between two measuring points (point to point) with a cap of 5%. Payments will not reduce if the S&P 500 goes down between the two annual measuring points. The first adjustment would be effective on the contract anniversary and subsequent adjustments would occur on future contract anniversaries. Only structured settlement income payments are eligible. Can be used for structured settlements paid to the plaintiff or for structured attorney fees. One structured annuity issuer currently offers this option as a rider. The annuity issuer has obtained a favorable IRS Private Letter Ruling to support its Index Linked Annuity Payment Adjustment Rider. |
| Deferred Defined Benefit Annuities | permit a Payee to defer the start of structured settlement payments to a later date, if desired, with a known benefit payment. |
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Period Certain Annuities |
Structured settlement payments that are paid only for a fixed period of time. Different modal structured settlement payments may be utilized when income is only needed for a specific time period. Modal Payments can be combined with a lump sum payment, at the end of a specific structured settlement payment period, to simulate the cash flow from a bond held to maturity. Often used for payments timed to help fund college or grad school, or to layer retirement income for structured attorney fees. |
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Joint and Survivor Annuities |
can be purchased for two separate annuitants under one contract, whereupon joint and survivor payments will continue to the surviving annuitant after the primary annuitant's death at a rate equal to, or at a predetermined percentage of, the original benefit. |
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Treasury Funded Structured Settlements (TFSS) |
uses a combination of Treasury Inflation Protected Securities (TIPS) where the bond's underlying principal rises and falls with changes in the inflation rate ( currently the CPI-U), and STRIPS to guarantee deferred lump sum payments. Interest paid on the TIPS adjusts along with the principal. Also known as "T Bond Trust". |
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Variable Income Payout Structures** |
which allow the plaintiff or payee to participate in the returns of the equity markets with the same tax favored status as traditional structured settlements. Income payments will fluctuate to reflect the performance of the investment portfolios underlying the selected investment divisions and can be structured in various ways such as a life only, period certain, life with a period certain, deferred payout, joint and survivor and a quasi-lump sum basis. |
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Enhanced Structured Income |
Segments of structured settlement payment rights can be purchased in the secondary structured settlement market at attractive rates and plugged into the need/ time continuum. While the income derived from a purchase of structured settlement payment rights in such a manner is not completely income tax free (like the traditional physical injury structure), it may be attractive, even on an after tax basis, particularly on shorter durations, or where there are offsetting tax deductions that can be used (such as ongoing medicals). Unlike structured annuities which can be quoted directly from software available from life insurance companies, such payments rights are dependent on inventory in the secondary market. Often purchased via a structured asset management trust for simplicity of administration for the plaintiff, or an IRA or other qualified retirement plan. There is also a way for attorneys to use enhanced structured income for structured attorney fees. Call for details. |
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**currently mothballed by the annuity issuer. When available it can only be offered through appropriately licensed, registered and appointed structured settlement brokers who are affiliated with a registered broker-dealer. Other underwriting rules apply.. |
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