The Release is the Key

As a Plaintiff or an attorney settling a personal injury lawsuit, it's essential to know that there are a number of periodic payment options available for you both at the time of settlement, before a final release and receipt of funds.

By including Structured Settlements as part of the Release with the Defendant/Insurer at the time of settlement, you can unlock a range of tax-free (for physical injury plaintiffs) and tax-deferred (for attorneys and plaintiffs in non-physical injury cases) benefits.

Engaging a Settlement Planner — the Sooner the Better

Once an agreement is reached and the Release has been signed, it is most often too late to take advantage of these unique options; the sooner you engage a Settlement Planner the better.

Below are some of the key periodic payment options that are available when Structured Settlements are included in the Release:

1. Structured Settlement Annuities

The most traditional and common option is a Structured Settlement Annuity, which provides a fixed income stream from an annuity issued by a highly-rated life insurance company. Once the payment schedule is agreed upon, it's locked-in and not subject to market fluctuations.

Structured Settlement Annuities are an excellent choice if you want steady, predictable, guaranteed payments over time, or if you have concerns about managing large sums of money on your own.

Bottom Line: Perfect for replacing income, retirement needs, and for minors. A Structured Settlement Annuity offers incredible financial stability and can form the backbone of your financial plan — fixed and tax-free.

2. Growth Structured Settlements (GSS)

Another option is the Growth Structured Settlement (GSS), which for plaintiff clients utilizes a mix of a Vanguard fund (VASGX) and a fixed annuity to provide stable payments with the potential for growth. For taxable cases and attorney fees, 100% of proceeds can be placed into the Vanguard fund.

The GSS option is suitable if you want the potential for higher returns than a traditional Structured Settlement Annuity but also want to minimize market risk.

Bottom Line: Great it you want the stability of the underlying annuity with the potential upside of the Vanguard fund. A 20+ year horizon of deferral and payout is required. 

3. Index-Based Growth Riders

Index-Based Growth Riders are another option that ties periodic payments to an index, such as the S&P 500, and can protect against market volatility with a cap-and-floor protection feature.

Index-Based Growth Riders work well if you want want payments that may potentially grow over time with the general economy while providing peace of mind that payments will not be subject to extreme fluctuations in the market.

Bottom Line: Great if you want to ensure your payments increase with the economy over time, keeping up with inflation and the overall markets.  

4. Convertible Lump Sums

If you want the flexibility to capture higher rates that might be available in the future, the Convertible Lump Sum option may be the best choice. This option sets out a lump sum payment in the future that can automatically trigger into a monthly payment stream if interest rates improve. If rates worsen, you receive the guaranteed lump sum instead.

This option may be particularly appealing if you are not certain about your future financial needs or if you are concerned about the potential impact of inflation on your settlement funds.

Bottom Line: If rates are low and you think that they will be far better at a certain point in the future, you can opt for a payment stream at the going rate at that future time. You’ll get a cash lump sum payout if rates are worse at that time.

5. Market-Based Structured Settlements

Finally, for those who prefer to take more control of the investment backing their periodic payments, a Market-Based Structured Settlement option allows deferred proceeds to be placed into the market-based portfolio of their choice. The client can choose to use his/her own financial planner, or North Coast Asset Management can manage a customized or model portfolio that aligns with the client’s risk tolerance.

This option is well-suited for those who are looking for higher returns and can tolerate market risks.

Bottom Line: A good fit if you are risk tolerant and want more control over where your money is invested, or if you want your financial planner to manage your tax-free payment stream.

Access These Options With a Settlement Planner Before the Release

If entered into as part of the settlement agreement and Release, the interest gained in all of these vehicles is tax-free for physical injury and worker’s compensation Plaintiffs. Payments are tax-deferred for contingent fee attorneys and taxable case (non-physical injury) Plaintiffs.

With nearly two decades of experience in the settlement planning industry, Prindable Settlements is well-versed in all of these available periodic payment options. Contact us for a free consultation to fully explore your options and discuss the best decision for your unique situation in order to maximize your settlement.