If you choose to receive a
structured settlement payment rather than a lump sum, there are a few steps to
follow first. When a defendant and plaintiff agree to settle a claim with a
structured settlement, both parties discuss a cash sum payable by the defendant
as long as the plaintiff agrees to drop the lawsuit. The money is then
distributed and usually financed by an annuity as a series of periodic
payments.
With that in mind, take a look at
the in-depth process of receiving structured settlement payments:
1.
The Plaintiff Sues The Defendant
The defendant offers to give money
to the claimant in a negotiated settlement to obtain justice for an accident,
sickness, or death the defendant caused. This is done in order to avoid the
case from going to trial. If the case goes to trial and the judge decides in
favor of the plaintiff, the defendant is then obliged to establish a
settlement.
2.
The Plaintiff And Defendant Partner With a Qualified Assignee
The defendant provides the eligible
assignee with money to purchase an annuity for the plaintiff. It helps them to decide the terms of the
formal settlement agreement.
They determine issues like how high
the monthly payments should be, how long they should continue, whether larger
payouts at certain periods should increase, and so on.
3.
The Assignee Buys an Annuity from a Life Insurance Provider
The annuity arrangement must be set
up to match the needs of the settlement. If the annuity terms are set, they
cannot be modified. To pay attorney fees or to fund a designated trust, an
instant lump sum can also be set aside.
4.
The Life Insurance Company Sends Money the Plaintiff a Sequence of Payouts
In compliance with the provisions of
the annuity contract, the annuity receives interest to shield its value from
inflation, and selling the right to future payments on the secondary market is
the only way for the plaintiff to receive cash from the settlement ahead of
time.
How
Is the Money Dispersed?
Your payments are made on a monthly,
annual, or quarterly basis, depending on the terms of your contract. Payouts
come in fixed amounts or according to your needs and may rise or decrease. The
funds are generally sent out by a structured settlement payment firm, like Rightway Funding.
Also, the Federal Internal Revenue Services prohibits damages paid for physical
harm or accidental death from section 104(a)(2). Punitive damages are not
exempt, however.
The IRS, therefore, collects taxes
on structured compensation money that has been negotiated as part of monetary
damages or suffering that has not been caused by physical disease or injury.
Before making financial decisions with possible tax implications, always
consult an attorney or tax professional.
Understanding
a Structured Settlement Payment
The steps to receiving a structured
settlement payment are pretty straightforward as long as it goes through the
proper protocol.
If this article helped you
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