What is a Structured Settlement? Learn More
Transcript
- 1. What is a Structured Settlement? A BLOG ABOUT STRUCTURED SETTLEMENTS & FINANCES RELATED. WWW.SETTLEMOON.COM
- 2. What is a Structured Settlement? We see them all the time these days, those annoying late night ads that tell we can instantly access our structure settlement money. What are these ads talking about? What are structured settlements? And why do they get so much attention? www.settlemoon.com
- 3. Two different main types of settlements : There are many different types of settlements, but for simplicities sake we are going to go over the two biggest types, structured and non-structured settlements. Let’s give an example, let’s say that Bob has been injured in a car wreck, Bob then receives $200,000 settlement from the other drivers insurance. According to law, the $200,000 is non-taxable, so Bob happily accepts the money. He then invests the money, and finds that the earnings are taxable. This is exactly how a non-structured settlement works, the money you are rewarded is non-taxable, and however, if you invest the money, the earnings are then taxable. In comparison, let’s say that Bob decides to have a structured settlement. He decides he wants to receive 10,000$ a year for the next 20 years. The great thing is, structured settlements are non-taxable even after investment. That means that Bob can go invest his money and the earnings are tax free. www.settlemoon.com
- 4. How does this work? Structured settlements involve structured settlement brokers. Brokers are paid commissions by the life insurance company that is issuing the annuity. Brokers give you all sorts of options as well, for instance, let’s say that you want your settlement money to get to you when you’re planning on retiring in 20 years. Brokers can do that, let’s say that you want your significant other to receive some of the settlement as well, brokers can also do that. As you can see you have a lot of leeway with your structured settlements. The key is to decide what you want before you sign the dotted line, after you’ve set up your structured settlement, it can’t be changed. Be careful with these commissions assigned to the brokers. It’s normal for insurance companies to charge high commissions for their brokers, however make sure that these commissions don’t eat up too much of your money on your annuity. Try to make sure that they keep things reasonably priced, don’t be afraid to negotiate at all. www.settlemoon.com
- 5. The gritty details : Structured settlements have an interesting structure that may seem strange to some people. When you set up a structured settlement you don’t get the settlement money directly from the defendant. Instead they send the money to a third party “assignment company”. This company is in charge of getting you your payments when they are due. It may seem strange, but it’s actually for those tax purposes. With the way tax laws are written it would be impossible for you to be able to directly receive the money, and not pay the taxes on your investments earnings. The reasons why this works would take a whole other article to explain, needless to say the important thing is that it does work. www.settlemoon.com
- 6. Pros of a structured settlement? As we’ve already mentioned a structured settlement has quite a few pluses when taxes are involved. It makes it much easier to manage your investments as you will not have to worry about taxes on the earnings. The other plus of a structured settlement is that it’s much easier to save and manage the money that you are receiving. It’s much easier to keep yourself from spending that whole $200,000 when you can’t receive it all at once. Therefore this can lend itself to smarter investments as well. www.settlemoon.com
- 7. What about those ads on T.V.? Some people get themselves on a structure settlement plan and find that they needed more money than they thought. For instance let’s say Bob ended up being unemployed a year later, as such he’s unable to pay his bills and sometimes wishes he could just have all that settlement money to pay off some debts. Through these factoring companies that advertise on the T.V. Bob is able to sell his structure settlement to get immediate cash. Of course the factoring companies buy his structured settlement at a discount, but at least Bob is able to pay his bills. This is exactly how these ads on T.V. operate, they are there solely to help people who suddenly go through a tough time and need some help. Also keep in mind that these companies exist to make a profit. Their purpose is to buy your structured settlement at a lower price then what you would receive in total. In order to get the best deal possible try to consult with multiple factoring companies and let them bid off of each other. This can really help you get the best deal possible as they will all try to compete for your structure settlement. Also before choosing a company make sure that they are large and have been around for a while. The last thing that you want is to sell your annuity for your structured settlement, only to have them go bankrupt, out of business, and never pay you that lump sum of money that you were looking in to. In other words, be careful, that would be one of the worst things that could happen. www.settlemoon.com
- 8. What are some cons to structured settlements? There are a few cons to structured settlements as well. The biggest one is the fact that you have to wait for your money. For people who are in a tight spot, and need immediate help, a structured settlement may not be for them. This just goes to show that structured settlements are not for everyone, analyze your situation and decide which would be the best for you. If you have been injured, and that’s why you are receiving a settlement, you should consult with a financial planner before you make any decisions. There are quite a few other options out there, and they are all great for different situations. By talking to a professional you’ll know exactly what option and plan would be the best for your situation. www.settlemoon.com
- 9. Conclusion Structured settlements can be great, especially when it comes to taxes. I hope that you now understand how they work and no longer have to ask yourself “what is a structured settlement?”. The key is to be aware and make sure no one is taking advantage of you. For More Information’s About Or Related To Structured Settlement Please Visit Our Website / Blog At : www.settlemoon.com