The internal rate of return for many structured settlement payments is quite attractive in today's market; rates above 4% are quite common (although, in particular, it's not a huge spread relative to comparable long-term bond yields). Depending on the size of the agreement, you can even set them up to guarantee a spouse's payments, similar to a “second to die” insurance policy. However, recipients may consider collecting their structured settlement in full when an emergency occurs or when a substantial amount of cash is needed. Always remember that your structured settlement was designed to protect your financial well-being and that of your dependents.
When a structured settlement is established, payments are often made through an annuity purchased on behalf of the payee and managed by an insurance company. That's right, but, from my perspective and that of the many lawyers I've discussed, these issues with reducing the amount of interest earned are not as important as the security and other benefits offered by a structured agreement. Settling a structured settlement and receiving a one-time payment can help you meet significant financial needs that you would otherwise need to borrow to repay. These types of monetary prizes can be disbursed all at once in a lump sum or over time in a series of regular, tax-free payments known as structured settlement.
Collecting a structured settlement generally requires a judge's review and approval before finalizing the sale. You can find the current value of your structured settlement using a formula or a table of current values. Arnold observes: “Because structured payments are insured and guaranteed, the ups and downs of the stock market will not affect your payments. When it comes to settlement plans, lawyers and clients are most likely familiar with a structured agreement.
I asked Theo's question by Peter Arnold, who has been in the field of structured settlement for more than 20 years and was previously deputy director of the National Structured Settlement Trading Association. Once the defendant receives notice of the lawsuit, they can try to negotiate a structured settlement before they go to trial. Structured settlement agreements can be beneficial to people who receive these payments. However, it is extremely important to understand that your structured settlement is increasing tax-deferred with compound interest, so you are not paying taxes on this money at this time and the funds are accruing interest on interest earned from the prior period.
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