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Structured settlements are financial packages or financial agreements permitting a settlement to be paid through an annuity via regularly scheduled installments either for a fixed period or for the lifetime of the claimant. Because it is tailor-made for individual cases, the structured settlement may also include some immediate payment to cover special requirements. The payments are typically funded by annuities, reinsurance, or occasionally U.S. government obligations. The structured settlements are mostly setup for lawsuit settlements, insurance settlements, lottery awards, casino and jackpot winnings and contest payments. Structured settlements have not always been available. In 1982, Congress passed The Periodic Payment Settlement Act of 1982 (Public Law 97-473), as a way to make large settlements more agreeable to parties and provide certain protection to victims. It also encouraged people to use them by granting them tax-free status. As a result, many people now choose a structured settlement agreement over a lump sum payment, and courts often award them in civil actions where there will be long-term costs of living and the necessity for obtaining cash payments at some point in the future. Structured settlements- When created? Structured settlements are not appropriate in all kind of cases. Since structures allow settlement funds to grow income tax-free and to be preserved to meet future financial needs, any liability case can be suitable for a structured settlement. However, the following are cases in which structures should always be considered. Structured settlements are designed for many types of cases though including: - All catastrophic cases including paralysis, brain damage, severe burns, loss of limb or severe injury cases. - Wrongful death cases where a surviving family will need a regular income to replace that of the lost spouse/parent. - Permanent or temporary disabilities that will take extensive recovery time. - Most of Workers compensation cases- Most of cases with a reserve or value of $50,000 or more, for example lottery or casino awards. - Guardianship cases where there are minor children or another person who is judged to be incompetent such as a person with psychological, emotional, or mental handicaps Structured Settlements- How created? Structured settlements can be formed in many different ways, and their structure is basically determined by the financial needs of the claimant. The simplest structured settlements are created with an even distribution of cash on a given interim for the term of the agreement. Such a settlement could include a payment every month for 15- 20 years as an example. A properly developed structural settlement agreement also includes the time value of money because by design, they do not pay interest. The interest is calculated in as a part of the payment. In essence, the structured settlement incorporates a fixed interest rate that is also completely tax-free as it is part of the settlement. Benefits of a Structured Settlement: Benefits to Claimants: 1. Choice: Allows the claimant a choice at settlement. Benefits can be received based on needs rather than a lump sum which has to be invested at risk, incurring fees. 2. Tax-free: Structured settlements provide a steady stream of cash to claimant that is completely free of tax liability, both at federal and the state level. 3. Regular payment stream: A structured settlement annuity provides regular payment stream to claimant. 4. More Secure: Maximum security since periodic payments are funded by annuities or reinsurance issued by the largest, most secure life insurance companies. 5. Structured Settlements are cheaper: Another benefit to structured settlements is that they are often arrived at without the risk and time loss of going to court. Benefits to the defense: 1. Bridge Gaps: Helps bridge gaps between plaintiff and defendant. 2. Reduces litigation costs: For many reasons, defendants who believe they could have liability will make an offer of a structured settlement to minimize their costs. 3. Reduce settlement cost: Substandard age rating can significantly reduce settlement cost. 4. Structured Settlements are cheaper: Because they are often arrived at without the risk and time loss of going to court. You can sell Your Structured Settlements! Now you can sell your future monthly payments and be free of the restrictive schedule of disbursement imposed by your structured insurance settlement. There are some finance companies those will pay you a large lump sum of cash now, rather than you receiving smaller monthly payments for the remainder of the payout. You may like to sell your structured settlement because some of the following reasons: 1. Your life situation changed since your structured settlement was created. 2. You have an emergency situation or a special opportunity occurred in your life which requires cash you do not currently have. 3. You want to start a new business but do not have the cash needed. 4. You need money for a special event in your life like the wedding of your child. 5. You have outgrown your current home but don't know where you'll find the money to buy a larger home or add on to your existing home. You also have the options to sell your settlement to suit your requirements as followings: - Cash payouts in full: Full Payment refers to a plan where the individual sells all the remaining future payments at a discounted present value for a lump sum payment. - Partial buyouts: Partial Payment refers to a plan where the individual sells a specific number of future payments at a discounted present value for a lump sum payment. -Shared payment plans: Shared Payment refers to a plan where the individual sells a portion of their future payment(s) at a discounted present value and keeps a portion. I personally believe that most important reason to sell your structured settlement today is that you take advantage of the financial principle of the Time Value of Money, which means that a dollar is more valuable to you today than it will be in the future; you get your money before inflation kills its value. Deal with a company that will structure the transaction based on your specific financial requirements and only acquire the portion of your payment stream that is necessary for you to fulfill your needs.
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