Structured Settlement Annuity: 5 Key Things to Know

Closeup of mallet being hit on stacked coins at table in courtroom

Are you expecting a lawsuit settlement soon?

One of the most common ways to get paid for a lawsuit settlement is through a structured settlement annuity.

Do you understand what this is? Do you know how it works?

If you are expecting a settlement from a lawsuit, you should learn the following five things about structured settlement annuities before you have to choose if you want one for your settlement.

1. A Structured Settlement Annuity Provides a Stream of Payments

Most plaintiffs in lawsuits have the choice of receiving their settlements in lump-sum form or the form of a structured settlement annuity. If you receive a lump-sum, you get all the money at once.

If you choose a structured settlement, you receive your money in the form of a stream of payments over time.

People often prefer structured settlements for several reasons. The primary reason is that it makes budgeting easier for them.

The money you receive from your lawsuit goes into the annuity, which is an investment. You will then receive automatic payments from the investment over time.

2. You Can Choose the Terms of the Annuity

One benefit of an annuity is the freedom to choose the terms. You can choose how often you receive payments. Would you like them monthly, yearly, or semi-yearly?

You can also choose the time frame for the payments. Would you like them to last for five years, ten years, or 20 years? You can choose.

The amount you receive for the payments will be lower as you extend the annuity’s duration, so you should factor this in as you decide.

3. The Money Is Tax-Free

Another benefit of choosing a structured settlement annuity is that it is tax-free. If you receive a $25,000 payout from the annuity every year, you will not pay taxes on this money.

The money you receive from the annuity is tax-free, so your payments will not create a tax liability for you.

4. You Get a Fixed or Variable Rate

When you choose your annuity, you might have the option of a fixed interest rate or a variable rate.

A fixed-rate provides the same interest rate for the entire duration of the annuity. This option gives you more control over your proceeds.

A variable-rate changes, which can be good or bad. If the rate increases, you make more money. If the rate decreases, though, you receive less money from your annuity.

5. You Can Sell It

Choosing an annuity for your lawsuit settlement is a great option, but the best news is that you can sell it if you ever decide you need all the cash right now.

If you want to sell it, you must find a company that purchases structured settlements. They will give you an offer for your annuity, and they will pay you a lump-sum of cash if you accept the offer.

How to Learn More About Structured Settlement Annuities

A structured settlement annuity provides an excellent way to receive a settlement from a lawsuit.

If you have the option of receiving an annuity or a lump-sum payment for your lawsuit proceeds, make sure you compare the pros and cons in each.

To learn more about structured settlements, check out the rest of our website.

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