When we work with personal injury attorneys and their clients and discuss options for settlement proceeds planning, one common topic we discuss is the payout options of structured settlement annuities.
The Flexibility of Structured Settlement Annuities
One concept we use to explain annuities is to compare an annuity to concrete. When you set up an annuity, it’s like pouring concrete — it’s very flexible in the beginning, and it can be as creative as you want. However, once it’s set and established, it’s hard to change.
Structured Settlement Annuity Payout Options When Working With Minors
When we work with a minor for whom we’re setting up a structured settlement annuity, we can design the structured settlement annuity so that the individual receives semesterly payments to help fund future college expenses.
At the date of the anticipated graduation, we can design the annuity to make a lump sum payment to help the client transition into the next phase of his or her life. This lump sum can be used as a down payment on a first home or graduate school or whichever purchase decision he/she makes at that age.
Structured Settlement Annuity Payout Options When Working With Adults
If we’re working with an adult who needs monthly payments for the next 10 years, we can design the annuity to make monthly payments over that 10 year period, or we can set up the annuity with lump-sum payments along the way.
In situations where a client wants a guaranteed income stream for life, we can include a monthly benefit that pays to that client for the rest of his/her life. This provides security because the client cannot outlive their payment stream. By so doing, we can ensure income for the rest of the client’s life.
Increasing or Decreasing Payments
What about inflation? Can payouts from a structured settlement annuity keep up with inflation?
The short answer is, yes.
Thanks to the ability of structured settlement annuities to earn interest, payments can be set up so that they adjust upward over time — which can be very helpful if a client’s health care costs are expected to increase in the future.
Alternatively, structured settlement annuity payouts can also be set up so that they decrease over time. Structuring payments to decrease may make sense in certain situations, such as when a minor beneficiary reaches the age of majority.
Does a Structured Settlement Annuity Make Sense For Your Client?
While the payout options offered by structured settlement annuities are very flexible, it’s important to remember that the payout design and schedule have to be decided at the time of settlement. Once the payout schedule has been determined, the design can’t be modified or changed.
If you have a question about a certain case or a client, give us a call. We can help you come up and determine if an annuity makes sense for your client, and if so, we can help design some payout options that fit the needs of your client.