How does a structured settlement annuity work?
The process of arriving at a structured settlement is through negotiations concerning the value of the annuity and payment schedule. The process involves primarily a claimant and the life insurance company; if the structured settlement annuity is related to litigation, it will involve the defendant as well.
As per the process, the defendant agrees as per a contractual agreement to pay the claimant sums of money on a periodic basis and in exchange the claimant drops his litigation. The defendant directs a third party/assignee to execute the annuities on its behalf and provides it with funds necessary to do so. An annuity contract is purchased by the assignee and is used for fulfilling the periodic payment obligations.
Individuals who are in the process of obtaining a structured settlement annuity can avail the services of a broker who can help them with the best deal available with respect to their circumstances.
Structured settlements are popular because of the benefits that they offer. These include a tax-free payment stream over a period of time and a guarantee of payment. Other investment alternatives such as stocks and real estate may offer better returns but do not provide the guarantee and security offered by structured settlements. These settlements are regulated by state and federal laws that need to be observed. These laws may require compulsory legal opinion in a structured settlement transaction.
Structured settlement firms manage the paperwork of a structured settlement annuity. The documents include the Settlement Agreement and Release, court orders, assignment agreement, and the annuity contract. The defendant should ensure that he fulfills all conditions for the annuity to remain tax-free for the duration of the settlement. In order to protect the tax-free status of a structured settlement annuity, it is also important to ensure that once the structured settlement annuity has been agreed upon by the concerned parties, it should not be altered. The payments from a structured settlement can also be made to an estate, in such a case, they are free from income tax but estate tax is levied. The closing of a structured settlement can take three to six months. An individual starts receiving payments thirty to forty-five days after getting the court order.
Related posts
- Your Structured Settlements - When You Should Sell Them
- Tax Facts on Insurance & Employee Benefits 2007: Life and Health Insurance, Annuities, Employee Plans, Estates Planning & Trusts, Business Continuation
- Career In Banking
- How to Get Cash For a Structured Settlement
- Tax Facts on Insurance & Employee Benefits 2004: Life & Health Insurance, Annuities, Employee Plans, Estates Planning & Trusts, Business Continuation
- 4 Steps to Effective Estate Planning
- 1995 Tax Facts on Life Insurance/Life & Health Insurance, Annuities Employee Plans, Estates & Trusts Business Continuation
- Tax Facts 1 2001: Life & Health Insurance, Annuities, Employee Plans, Estates & Trusts, Business Continuation
- Disadvantages Of Structured Settlements
- Why would a company want to buy my structured settlement?
Tags: Annuities, Annuity, Annuity Contract, Annuity Payment, Assignee, Assignment Agreement, Claimant, Contractual Agreement, Defendant, Investment Alternatives, Legal Opinion, Life Insurance Company, Litigation, Paperwork, Payment Obligations, Payment Stream, Periodic Basis, Settlement, Settlement Agreement, Structured, Structured Settlement Annuity, Structured Settlements, Sums Of Money, Work