Structured Settlement Annuities
A structured settlement annuity is simply an agreement where an individual and an insurance company agree that the latter party will give a previously set amount of money within a given period of time if the former encounters an accident.
What are the Documents Involved?
A structured settlement annuity involves several documents. These are an annuity policy, annuity application, a qualified assignment, an agreement and in cases where the claim is being made by a minor, a court order. All these are signed and agreed upon the consent of all the parties involved.
How are the Payments Structured?
The payments can be structured in several ways depending on the agreement between the parties involved which are the insurer and the individual. Mostly based on the duration of life of the individual, the payments can be a one-off lump sum, varying amounts of structured installments or even equal installments over a definite period of time. At this point it is important to note that the payments are exempt from income tax and since they are assured by the contract can never fail.
What to Consider When Choosing the Duration the Payments
The annuity is a long term life decisions and thus a lot of thought and consideration need to be put into it. Factors like current age, possible occupational risks, expenses in a month, retirement plans and many others need to be considered before one puts pen to paper on the agreement on the period. The exemption from income tax clause is subject to the assumption that the original structure of the payments will not be changed, and thus this is something that should be avoided. This underlines the need to think long and hard about all the terms before signing the agreement.
It is important to note that this being a long term decision; the insurer you choose should have a well-established credibility. You should be cognizant of the state and federal laws governing the nature of the agreement you get into, the type of structured settlement that is subject to tax and which is not among other important factors.