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The Benefits of a Structured
Settlement
There are a number of ways Structured Settlements provide financial security and independence.
The Benefits of a Structured
Settlement
There are a number of ways Structured Settlements provide financial security and independence.

One of the greatest advantages of a structured settlement is that it provides substantial security and financial independence, ensuring that the settlement award will be available for the plaintiff and/or his or her family, often for a lifetime. Additionally, there are many other benefits:

  • Tax-free Income: 100% of structured settlement annuity is tax-free – including the settlement award, principal, ongoing payments and interest earned.
  • Customized Payments:  Payment amounts can be designed to meet a plaintiff’s specific cash flow needs, including medical and educational expenses, big-ticket purchases, and everyday living expenses.
  • Guaranteed Income for Life: The structured settlement is often designed to pay for the duration of the plaintiff’s lifetime.
  • Cost of Living Adjustments (COLA): A COLA may be built into a structured settlement design to provide for annual cost of living increases, such as 2%, 3%, or 4%.
  • Substandard Age Rating: A substandard age rating may be available upon review of the plaintiff’s health history. The health injury or illness does not have to relate to the lawsuit or settlement claim. This “rated age” may reduce the cost of the structured settlement or increase the rate of return, enhancing the payments.
  • Direct Deposit: As a safe and reassuring alternative to structured settlement payments being mailed to the plaintiff, structured settlement annuity payments can be deposited directly into the plaintiff’s checking or savings account.
  • Secure Payments: Structured settlement payments are guaranteed by the financially strongest life insurance companies in the U.S. Rated A+ or higher by A.M. BestRated, Aa3 or higher by Moody’s, AA- or higher by Standard & Poor’s and Fitch. Learn more about life insurance companies and their financial ratings
  • No Management Fees: Unlike many other investment vehicles and products, structured settlements do not charge management fees, commissions, or expenses.
  • Risk Protection: Structured settlements are designed to help plaintiffs and their families avoid financial risks, including:Financial pressure, bad advice, or requests from friends, family members, colleagues, and outside sources, excessive spending, mismanagement of funds, bad or risky investments, volatile market changes, and running out of money too soon – the structure is a strong retirement planning tool guaranteeing the retired and senior adult income that does not run out before death.

Structured Settlements vs. Cash

To better understand the advantages of a structured settlement compared to a cash lump-sum payment, consider the following case study:

Jerry, age 30, is the plaintiff in a personal injury lawsuit that results in an approximate $300,000 net settlement after legal fees and medical expenses. His Life Care Plan predicts that Jerry will need about $2,000 per month for ongoing medical care and living expenses.

If Jerry takes an all-cash lump-sum settlement, his funds are subject to premature dissipation. Although Jerry is financially responsible, he is likely to run out of money ten years before reaching his normal life expectancy. As illustrated in the chart below, in the “Cash” section, the amount of expected payout assumes Jerry receives an annual rate of return of 7%, a federal income tax rate of return of 28%, and spends none of the original $300,000 (this illustrates total investment with return).

However, if Jerry places the money in a structured settlement annuity, he cannot outlive his payments. As illustrated in the chart below, he will receive a guaranteed income for as long as he lives, with an expected payout total of $1,075,823, tax-free. Jerry will not outlive his income; he will receive a safe, secure monthly payment for as long as he lives.

Payment Options
Guaranteed Payments
Expected Payout

Cash

$300,000
$822,530*

Structured Settlement
$2,000 payable monthly for 20 years certain and life

$437,623
$1,075,823**

* Assuming an annual return of 7%, federal income tax rate of 28%, and 0% dissipation
** Tax-free. Assuming a life contingent annuity with a 20-year guarantee and no rated age

A vital and most favored benefit of the structured settlement is the security and peace of mind of knowing the money will be there when it is needed. This and other benefits of a structured settlement are not always evident to settlement recipients or their financial advisors. Inevitably, the settlement process is extremely stressful for injury victims. ROBINYOUNG & COMPANY understands much of this stress and difficulty and is dedicated to reaching the best-expedited financial solution for each and every client.

Learn more by contacting ROBINYOUNG & COMPANY.

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