Benefits of a Structured Settlement (a/k/a Periodic Payment Settlement)
Benefits of Structuring Your Attorney Fees
A Claims Settlement Option More Attractive Than Cash
Structured Settlement Terms
Our Process
Downloadable Brochures

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Benefits of a Structured Settlement (a/k/a Periodic Payment Settlement)

Now that it is time to settle your claim, two settlement options are available. The first is a lump-sum payment, where the entire amount is paid to you at the time of settlement. A second option is a periodic payment settlement, in which you receive an initial sum “up front” and the rest of the settlement is paid in a series of payments. The amount and frequency of these payments will depend on your future needs and individual wishes.

While the lump-sum settlement is one possibility, the many advantages of a periodic payment settlement have made them a frequently chosen settlement option. One big reason is that 90 percent of the cash in a lump sum settlement is gone within five years. Here are other reasons why a periodic payment makes good sense:

  • Income Tax Free Payments to You

As a result of the Periodic Payment Settlement Act of 1982, all payments to you are tax-free. The Act allows for the tax-free accrual of interest on the sum of money used to fund your periodic payments. As a result, you receive greater benefits than would be available to you had you chosen to invest the money yourself.

  • Guaranteed Income

Unlike a lump-sum settlement, a periodic payment settlement will provide guaranteed payments at predetermined intervals, which gives you financial security.

  • Flexibility to Meet Your Individual Needs

A periodic payment settlement can be designed to meet your needs. You may wish to provide for future education expenses, supplement a retirement fund, or simply provide for security against inflation or unforeseen circumstances. A periodic payment settlement can accomplish these objectives, and a great many more, depending on your needs and wishes.

  • Maximum Security

Your payments will not be dependent upon financial markets or the economy, and will provide a secure source of funds for you in the future. The amount and time of your periodic payments are guaranteed by the annuity carrier.

  • Beneficiary Protection

In the event of premature death, the person who is the beneficiary would also continue to receive the future guaranteed payments. These payments are income tax-free to your designated beneficiary as well.

  • No Brokerage Fees or Expenses

If you settled on a lump-sum, you may incur brokerage fees and expenses when you invest your funds. Also, investments in stocks can be speculative, carrying with them the risk of loss. Even less speculative investments such as bonds and CDs, are subject to the risk of market fluctuation.

Simply put, the periodic payment is an excellent option. When you consider all of the advantages, a periodic payment settlement may be the right choice for you.

We will be happy to provide you with examples of how a periodic payment settlement can be structured for your claim, and we will carefully review these examples with you. Please keep in mind that these proposals can be changed in a number of ways in order to provide you with a payment schedule catered to your individual needs.

Benefits of Structuring Your Attorney Fees

  • – You may receive your attorney fees over time and thereby defer your tax liability.*
  • – Spreading your fees over several installment payments may allow you to avoid a higher tax bracket.**
  • – Structured fees provide a guaranteed, stable income stream to match expenses or provide for retirement income.
  • – Your investment is guaranteed by a major life insurance company.
  • – Interest rates accrue on a tax-deferred basis.
  • – Current structure interest rates are much higher than provided by other institutions.
  • – Structures relieve the burden and expense of money management, avoiding tough investment decisions, and experiencing management fees that cut into your earnings.
  • – Payments come directly to you and are eligible for electronic transfer to your bank account.

Structuring your fees is easy. Simply sign the provided “Hold Harmless” agreement and W-9 forms. Standard language for structuring your attorney fees is included in the settlement documents.

*In 1996, the U.S. Court of Appeals for the 11th Circuit affirmed in Richard A. Childs, Et al. vs. Commissioner of Internal Revenue Service 103 T.C. No. 36 Docket No. 15639-92 that attorneys may structure their fees, holding that taxes are payable on structured attorney fees in the year they are received.

**Information provided is not intended as legal or tax advice. You should consult with your tax advisor for information regarding your specific circumstances.

A Claims Settlement Option More Attractive Than Cash

A structured settlement is a proven, effective settlement option that combines up-front cash and deferred payments to settle bodily injury, wrongful death or workers’ compensation claims. Plaintiff attorneys, judges, defense attorneys and workers’ compensation boards advocate the use of structured settlements because they better meet claimants’ needs for financial security and pay significantly more benefits than cash settlements.

Capital Planning, Inc., a structured settlement annuity company, works together with various life insurance companies (“annuity carriers”) to provide this attractive settlement option for claimants by designing and implementing settlement annuities tailored to the claimant’s specific needs. Claimants earn a good investment return, which, under current law, can be received free of income tax.

Why Structured Settlements Work

More Money
Claimants can receive significantly more money with a structured settlement than with a cash settlement.

Tax-Free Payments
According to current law, payments received by claimants or his/her beneficiary are not considered taxable income as long as the structured settlement complies with Internal Revenue Code provisions.

Security
A good investment return is assured. Payments are made by a financially secure, A.M. Best’s “A”, “A+” or “A++” rated annuity carrier.

Immediate Cash
Claimants usually receive cash up-front to pay expenses, such as attorney fees, unpaid medical bills or other items the claimant feels are important.

Income/Lump Sums
Monthly or annual payments provide guaranteed, regular secure income. Money is available for future expenses, such as medical care, mortgage payments or future education needs. Lump-sum payments help provide protection against increased cost-of-living expenses or as security for a spouse, child or other dependents of deceased claimants.

How Structured Settlements Work

An Agreement
A negotiated settlement is reached, which usually includes cash and deferred payments made over time.

Funding
The annuity is funded by the insurance company on the claimant’s behalf. Future payments are funded by an annuity from a financially secure A.M. Best’s “A”, “A+” or “A++” rated annuity carrier. Claimants cannot own or control the annuity policy, but receive the payments stipulated in the settlement agreement/release agreed to by all parties.

Payments
Deferred payments are made directly to the claimants by the selected annuity carrier.

The Obligation
The property-casualty insurer transfers its obligation to make future payments to a third party assignee, which is affiliated with the annuity carrier. The annuity carrier guarantees these payments.

Individual Plans
A structured settlement can be tailored to individual and family needs and desires. This is an important feature of a structured settlement—it can be planned with consideration given to the claimant’s circumstances now and in the future. .

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Structured Settlement Terms

Structured Settlement
A combination of cash and periodic payments designed to help meet an individual’s or family’s financial needs.

Beneficiary
Person(s) designated to receive the benefits of a structured settlement if the claimant dies before all guaranteed benefits are paid. Changes in the beneficiary designation must be made in writing to the owner of the policy.

Up Front
Cash paid immediately upon settlement to a claimant. Commonly, it pays attorney fees, medical expenses, debts or other personal expenses. A structured settlement usually includes both up-front cash and deferred payments.

Life Expectancy
Statistically, the remaining number of years a person of a given age is expected to live.

Lifetime Income
A stream of payments paid monthly or annually that will continue for as long as the claimant is living. This may include a period of guaranteed income (see “GUARANTEED PAYMENTS”) below.

Ownership/Control
To insure the tax-free status of deferred payments, a claimant must not have actual or constructive receipt of the money used to purchase the annuity, and may not control or have an ownership interest in the annuity.

Lump-Sum Payments
Single payments made at specified dates in the future. They are used to supplement income and provide additional money for specific needs, such as the purchase of a car or the down payment on a home.

Assignment/Transfer of Obligation
Internal Revenue Code Section 130 provides that the party(s) responsible for funding the settlement agree to the periodic payments for the injured party(s), then transfers those obligations to an assignment company. The assignee agrees to make the payments and purchases the annuity from the annuity carrier with the payments made directly to the injured person(s).

Assignee
The structured settlement annuity is owned by a third party assignee, which is affiliated with the annuity carrier. The claimant has no ownership interest in the policy, but has a legal right to receive the future payments as specified in the settlement agreement/release.

Education Funds
Periodic payments made during the time a claimant requires financial assistance for education or training.

Guaranteed Payments
All payments stipulated as guaranteed are paid to the claimant if living or to the designated beneficiary if the claimant is deceased.

Guaranteed Rates
The annuity carrier guarantees its settlement annuity rates for short periods of time (normally 7-10 days) due to the unpredictability of the financial market.

Life Contigent Payments
Paid only if the claimant is living on the due date of the payment. Unlike guaranteed benefits, these payments do not pass to the beneficiary after the death of the claimant.