Structured Settlements: What Are They?

Structured Settlements are used to pay out a large sum of money over time. Much the same way that you pay your credit card bill every month, a creditor uses a structured settlement to pay out what they owe to a person on a regular schedule. Most structured settlements are purchased annuities, paying out over time on an annual basis.

The most spectacular form of structured settlements are lottery payments. Rather than deal with the financial hit of handing out a single check for tens to hundreds of millions of dollars, state governments with lottery programs buy an annuity that’s guaranteed to pay out the entire promised amount, usually at a discount – the annuity holder invests the money in bonds or other stable investments, sufficient to pay out the annual payment and turn a bit of a profit for the annuity holder.

The other common use of structured settlements is in court damage cases and they work in much the same way. A plaintiff wins a judgment in court for damages and the defendant will typically buy an annuity to pay out the damages on an annual basis, putting the payment schedule in the hands of the annuity holder. From a corporate tax purpose, purchasing the annuity is a one-time-charge and there are several advantages to doing this. The structured settlement type payment is the result of changes in federal laws dating back to 1982 and is meant to provide a steady stream of income for the recipient to pay for long term care for disability or injury payments.

Private citizens can also buy annuities, though this is less common than it used to be. Annuities bought this way were used extensively as supplemental retirement income, before the regulations on IRAs, 401(k) programs and Roth IRA’s allowed people to get more direct control over their retirement investments.

If you’re the beneficiary of an annuity, it can present some problems for you. First, there’s some small temptation, when getting that big annual check, to blow it on something celebratory, knowing that your day job can support you for the rest of the year. While this can be fun, it’s very rarely sound financial planning. The second problem posed by an annuity is that the payments usually don’t increase over time. This is the chief problem with them as a retirement strategy. Bringing home $500 a month in the mid-80s was a decent retirement income, assuming the house and car were paid for. Trying to squeeze by on $500 a month 20 years later is considerably more difficult, as day to day expenses rise with inflation on an annual basis.

Most annuities are set up as regular payments for 10, 20 or 30 years. Sometimes an emergency strikes and an annuity payment isn’t always the best way to handle it. At that point,there are several firms out there that will pay you cash for an annuity. They offer you a large sum of cash up front and buy the annuity from you.

Copyright 2007 Trevor Kassulke - All Rights Reserved





Structured Settlement News:
Stone Street Capital Announces New Online Resource for the . - MarketWatch

Stone Street Capital Announces New Online Resource for the .
MarketWatch - Dec 10, 2008
This resource for the structured settlement industry is provided by Stone Street Capital in order to make more information available across all segments of .
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Stone Street Capital Announces New Online Resource for the . - International Business Times

Stone Street Capital Announces New Online Resource for the .
International Business Times, NY - Dec 10, 2008
This resource for the structured settlement industry is provided by StoneStreet Capital in order to make more information available across allsegments of .
..


Appeals may delay payments in contaminated pet food case (Los Angeles Times)
Four people have filed objections to the settlement for owners of dogs and cats that were sickened or died after eating melamine-laced food. More than 23,000 pet owners in the United States have asked for money from a $24-million settlement for owners of dogs and cats that were sickened or died after eating pet food contaminated with an industrial chemical...


Mizin signs mortgage deal with RakBank (Banking Business Review)
Mizin, the real-estate development arm of United Arab Emirates-based Tatweer, has formed a mortgage deal with RakBank to provide Mizins Remraam community with a structured mortgage offering...


Dear Mr. President (Las Vegas Sun)
If you could pass a note to Barack Obama, what would it say? The Sun asked a diverse group of Southern Nevadans to share...


Purchase Settlement Payment Article
Hence, there are people who would like the opportunity to sell their structured settlement. A purchase settlement payment may allow them to use those assets in a way that they can recover from a recent financial downturn (one that may ...


Appeals may delay payments in pet food case (Courier-Post)
More than 23,000 pet owners in the United States have asked for money from a $24 million settlement for owners of dogs and cats who were sickened or died after eating pet food contaminated with an industrial chemical...


Ringler Associates Michael E. Westcott Elected President of NAMSAP - MarketWatch

Ringler Associates Michael E. Westcott Elected President of NAMSAP
MarketWatch - Dec 16, 2008
Since 1975, brokers have placed over 157000 settlement annuities totaling approximately $21 billion. These structured settlements have guaranteed tax-free .
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Appeals may delay payments in pet food case (MSNBC)
More than 23,000 pet owners in the U.S. have asked for money from a $24 million settlement for owners of dogs and cats who were sickened or died after eating contaminated pet food...


United India's restructuring proceeds at good pace (New Kerala)
Chennai, Dec 31 : The restructuring initiatives at the city based non-life major United India Insurance Company Ltd are progressing at a good pace, said a top company official Wednesday...


Structured Settlements 4Real: What's Real in the Structured .
Deadline day in the Matter of Honor structured settlement transparency initiative is upon us. In a month letters will be going out to state trial lawyer association and the American Association for Justice along with a white paper ...


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