Structured Settlements Definition

A structured settlement is a type of annuity that pays out lawsuit rewards over a long period of time. Learn about its benefits ways to sell payments.

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Tax Advantages Of A Structured Settlement Annuity Digital

Any employee contemplating a workers compensation settlement should consider the use of a structured settlement.

Structured settlement tax benefits. The tax exclusion extends to interest and dividends earned by funds in structured settlement accounts. Cash now is income tax free. Structured settlement annuities are designed to offer the benefits of a structured settlement while reducing or eliminating the potential drawbacks. Speak to a qualified. Structured settlement tax benefits mean payments are income tax free as damages personal physical injury or physical sickness wrongful death or workers comp. But tax is due on any interest or capital gains. A structured settlement may be used in conjunction with settlement planning tools that help preserve a claimants medicare benefits. This allows the benefit of tax exempt growth in a guaranteed annuity that can secure needed cash flows for years into the future. Structured settlement holders enjoy the benefit of not having to pay taxes on these payments. A structured settlement may provide a plaintiff with a substantial tax benefit because personal injury settlements are considered tax free under the us. Most structured settlement firms provide structured settlement services to their clients at absolutely no cost to their clients. If you receive a structured settlement instead of the 300000 cash youll get payments over a term of years or your lifetime however you choose and each payment is fully tax free. A structured medicare set aside arrangement msa will generally cost less than a non structured msa because of amortization of the future cash flow over the claimants life expectancy as opposed to funding all. Overall a structured settlement is hard to beat for a tax free source of income. However some exceptions apply and can make portions of a settlement taxable such as an award of punitive damages or interest that accrues on the settlement.

For future reference although there are some disadvantages to structured settlements see other questions and answers in this section overall if you want steady tax free regular income for a number of years or for your lifetime a structured settlement is the best way to go. Tax advantages of structured settlement annuities. Some settlements are taxable. When used properly they can be a very effective tool for protecting a settling plaintiffs long term financial security. Once the settlement funds are placed into a structured settlement annuity the annuity earns interest on those funds currently around 5 annually.