Introduction
Structured settlement annuities can be used in a variety of situations that can be beneficial to different types of clients. When used strategically, these annuities provide long-term financial security, protection from mismanagement, and valuable tax advantages.
Structured settlement annuities offer predictable, guaranteed payments that are not subject to market volatility. For clients who want financial stability or who may not have experience managing a lump sum settlement, an annuity can help ensure the funds last for the intended period. Because structured settlement payments are also tax-free when properly designed, they provide an added layer of financial efficiency that traditional investment tools cannot always match.
In this article, we’ll highlight two common scenarios where a structured settlement annuity can make a lot of sense—minor clients and elderly clients—while also exploring why this financial tool is often preferred in settlement planning.
When Does Using a Structured Settlement Annuity Make Sense for Minor Clients?
A structured settlement annuity may be the most beneficial option for a minor who is receiving a significant settlement amount due to some type of accident (e.g. a dog bite or an auto accident), and the parents don't want that child to receive all of those funds at age 18.
We can set up a structured settlement annuity for minors that pays annual, monthly, or semesterly payments starting at 18 years old, effectively giving the child a college fund. This is a common and typical use for a structured settlement.
When Does Using a Structured Settlement Annuity Make Sense for Elderly Clients?
Another situation where a structured settlement annuity makes sense is for elderly clients with fixed incomes. If the clients are conservative investors and they don't want to take risks in investing those funds in the stock market, often a structured settlement annuity is a great option.
In these situations, we can set up a lifetime annuity, and all or a portion of the funds from the settlement will go into the annuity. The elderly client (and if desired, the client’s spouse) will never outlive that money. If they live beyond 100 years old, the annuity will still keep paying them.
This lifetime annuity supplements their Social Security Retirement income, gives them a little bit more freedom each month to do the things they want to do, and provides peace of mind knowing they will never outlive their money.
If you want to learn more about structured settlement annuity, you might find these resources helpful:
- How Much Taxes Do You Pay on Lawsuit Settlements?
- Taxation of Structured Settlement Annuity
- How to Avoid Paying Taxes on Settlement Money
Final Thoughts
Minor clients and elderly clients are two classic use cases of when a structured settlement annuity may be an excellent option. If you have a client in one of these situations, it’s worth exploring whether a structured settlement annuity makes sense. Give us a call, we'd be happy to talk you through it. Amicus takes the complexity out of settlement planning. Whether it’s structured settlements or asset management, we’ve got you covered.
