Answers to Frequently Asked Questions
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What are my Settlement Options?

Two settlement options are available to settle your claim. The first would pay the entire amount at the time of settlement in the form of a single lump sum payment. A second alternative option is a periodic payment settlement, commonly referred to as a "structured settlement", that could pay an initial cash payment plus a series of benefits over a period of time. The amount and frequency of the payments can be designed to meet individual needs and objectives.

While the lump sum settlement is the traditional approach to settling liability claims, the many advantages of periodic payment settlements have made them popular and a frequently selected settlement option.

What is a Periodic Payment Settlement?

A periodic payment plan is a claim settlement arrangement to compensate for personal injury. Such an arrangement may include an initial "up-front" cash payment plus a schedule of future benefits designed to meet future financial needs or objectives.

Should you Consider a Periodic Payment Settlement?

A periodic payment settlement offers the following significant advantages over a lump sum settlement:

TAX-FREE BENEFITS TO YOU:
Pursuant to I.R.C. 104 (a) (2) of the Internal Revenue Code of 1986, as amended, all payments are "tax-free". The Code 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 otherwise be available to you had you chosen to invest the money yourself.

GUARANTEED PAYMENTS:
Unlike a lump sum settlement, a periodic payment settlement will provide guaranteed benefits at specified payment dates to assure you of financial security.

FLEXIBILITY TO MEET 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 financial security. The plan can be "tailor-made" to meet your objectives.

MAXIMUM SECURITY:
Benefits will not be affected by changes in the financial marketplace or the economy and will provide a secure source of funds in the future.

Would you be better off with a lump sum settlement and investing yourself?

In doing so, you would most likely incur substantial tax liabilities on the income produced by your investments. Private investment income is simply not eligible for the tax-free benefits available under the Code. And, in contrast to private investments, there are no brokerage fees or expenses when selecting a periodic payment settlement.

In addition, periodic settlements are virtually risk free. Investments in stock and other equities can be speculative, carrying with them the risk of loss. Even less speculative investments, such as bonds and certificates of deposit, are subject to the risk of investment fluctuation.

Do I have options in how I receive my payments?

Most structured settlements will provide monthly income for the rest of your life, or for a certain period of time. An annual cost of living adjustment can be included. Your payments can begin immediately, or the start date can be deferred until a time in the future, when you can best use the funds. They can include a provision for your spouse to continue receiving tax-free payments if you die before he or she does. A portion of your settlement can be taken as COLLEGE FUNDS for your children, or RETIREMENT INCOME for yourself. You may also include some large future lump sums paid in five, ten, fifteen, or more years in the future.

The main thing to remember is that all of your payments will come to you tax free, but must be part of the final settlement documentation that you will eventually sign concluding your lawsuit. You have a unique opportunity to have your payments designed in a way that meets your financial goals and needs, but this opportunity will cease once your case is fully settled. It is a good idea to work with your attorney and the structured settlement consultant to design a settlement that is best for you and your family and complies with Internal Revenue guidelines.

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