What Is a Tax-Free Structured Settlement Annuity

For over 30,000 recipients, structured settlements provide a steady flow of cash that gives them financial security. These payments are invaluable for people who find themselves suffering due to another party’s negligent or intentional actions. This unique financial tool delivers tax-free payments regularly.

If you currently have a claim, a structured settlement can be the solution you need for securing your family’s financial future upon receiving a settlement payout.

What Is a Structured Settlement Annuity?

A structured settlement is a financial tool implemented in the US civil court system. For example, when a party is found liable for someone else’s loss or injuries, the court-ordered payout can get put into a structured settlement fund.

Instead of the injured party receiving a single large check, they will receive regular interval payments.

There are a few common types of cases that use structured settlements.

  • Personal injury
  • Medical malpractice
  • Wrongful death
  • Workers’ compensation

How Does a Structured Settlement Work?

Many plaintiffs do not have experience with massive sums of money. So to protect their financial future, the money awarded in a civil lawsuit gets put into an annuity. The defendant funds the annuity by giving it to an assignment company.

This third-party company will either create the fund or work with a life company to create the fund. These third-party companies assume the liability of managing the fund and distributing the payments to the claimant.

During the life of the annuity, it could earn interest or dividends. This money earned is invested back into the fund and continues to grow tax-free.

When agreeing to the structured settlement, the claimant can dictate when they want payments to start, how long they run, the frequency of the payments, and the amount.

Benefits of Structured Settlements 

The biggest benefit of a structured settlement is that the payments are tax-free. The payments also continue to a beneficiary if the main recipient passes away before completing the payment agreement.

Yoru payments will never fluctuate, so they are insulated from the risks of stocks or bonds. You’ll also receive more with this type of setup than accepting a single lump-sum payout.

Selling Structured Settlements

Once a structured settlement is negotiated, you can’t go back and renegotiate the terms. This can leave you financially stuck if you need more money than what your structured settlement regularly delivers.

One option is to find a company that will buy structured settlements. The process works by selling your future payments to a third party at a discounted rate. You get the money upfront, and they get to collect your structured settlement payments for the agreed-upon amount.

An example of this type of company is We Pay More Funding. You apply by telling them about your structured settlement, and they make you an offer. If you agree to the offer, then you can accept.

Consider Agreeing to a Structured Settlement Payout

If you currently have a claim where you expect to receive a large sum of compensation, you’ll want to consider a structured settlement. This can provide you with financial security for years to come. If you find yourself in a bind, you can sell your future payments for an immediate cash influx.

Learn more about different financial products by checking out our other financial and money articles.