Q: What is a structured settlement?
Structured Settlements were designed specifically for individuals receiving money on account of personal physical injury. It is a guaranteed, fixed and tax-free annuity that pays over time.
Q: Who can “structure” their settlement?
Not everyone can take advantage of a Structured Settlement. Only those who are receiving settlement money on account of personal physical injury can “structure” their settlement money.
Q: Why “structure”?
There are many compelling reason to “structure” one’s settlement money. Structured Settlements provide tax-free payments, provide a steady, guaranteed income stream and eliminate the risk of mismanagement.
Q: Why are Structured Settlement payments tax-free?
Structured Settlements are governed by the Internal Revenue Code (IRC). Under section 104 (a)(2) of the IRC, compensation received on account of personal physical injury or sickness is not included in gross income and is therefore exempt from income tax. Thus, fixed annuity payments from a qualified Structured Settlement and all interest gains are tax-free. Because these payments are free from income tax obligation, they offer more money over time than a lump sum payment in most cases. You keep ALL of your principal and interest.
Q: How safe are Structured Settlements?
Very. A Structured Settlement is a contractual promise to pay. Unlike other investment options, Structured Settlements eliminate the exposure to market risks and the potential for investment failures. Structured Settlement annuities are issued by only the strongest life insurance companies. The annuity provider has to honor the annuity contract, to the penny.
Waterville Advisors only utilizes only A+ or A++ annuity providers (rated by A.M. Best as being “Superior”).
Also, stringent state regulations demand that there is always enough money in reserves to pay annuitants. In fact, all of the annuity providers used by Waterville Advisors have billions of dollars in surplus.
They also eliminate the risk, expense and worry of managing large sums of money. According to one recent study, approximately 30% of all personal injury victims completely dissipate their settlement money within 2 months and 90% completely dissipate their money within 5 years!
Q: What if something happens to me, what happens to the guaranteed payments?
If you should die, your beneficiary or beneficiaries will continue to receive the same guaranteed, tax-free payments promised to you.
Q: What if I am unsure right now but might want to “structure” later?
A Structured Settlement must be made a part of the settlement and must be incorporated into the settlement documents. If you receive your settlement as a lump sum you cannot structure later because, according to IRS rules, this is considered “constructive receipt”. That is why it is important to begin considering this option in advance of settlement.
Q: What are the fees associated with a Structured Settlement?
None. If you decide to structure your settlement, your settlement advisor will get paid by the life insurance company that provides the annuity. Unlike most traditional investments, there are no ongoing management fees. You will never get a bill from the annuity provider or Waterville Advisors.
Q: What payment options are available?
Structured Settlement payments can be specifically tailored to meet an individual’s needs. For example, payments can be made monthly, quarterly, semi-annually or annually; they can pay for a lifetime or for a set number of years; they can be paid immediately or they can start at a later date; they can provide for a child’s college education; they can provide for retirement; they can provide for medical needs; the scenarios are endless, it is entirely up to the individual and his or her specific needs.
Q: Can minors “structure”?
Absolutely. In fact, most judges insist on “structures” for minors because they deliver the highest rate of return of any guaranteed investment. The funds are set aside solely for the benefit of the minor and cannot be invaded by unscrupulous individuals.
Also, it is virtually impossible for the minor to dissipate the settlement funds because the plan that is implemented by the parent(s)/guardian(s) remains in effect for the duration of the plan whereas other investment options for minors pay out all of the settlement money at age 18. In short, “structures” protect your child’s interests.