Any individual that was seriously injured in some type of vehicle accident might be awarded a large sum as a condition of the lawsuit. If the plaintiff’s suit was successful, they will likely receive a court order judgment in their favor.
One of the most popular ways of disbursing money from a lawsuit is through a structured settlement payment plan. This is often offered as an alternative to a lump sum of cash. It is usually up to the judge in the case to decide which type of payment is best for the plaintiff.
A Purchased Annuity
In the event that the plaintiff was ordered to receive a structured settlement, as a condition of the judgment, they will receive payments over time. Typically, the defendant in the case can purchase a face value annuity, which is equal to the money that is owed to the plaintiff. However, they can pay a significantly lower amount to an insurance company or annuity company in exchange for a policy that will make the payments to the plaintiff.
An annuity is nothing more than an investment instrument that is sold by an annuity or insurance company. As a condition of the agreement with the defendant, the insurance company will make routine, scheduled payments to fulfill the obligations of the settlement. As a result, the plaintiff in the case (the annuitant) will receive a monthly or annual guaranteed income that lasts for a pre-determined length of time.
What to Consider
In some cases, the plaintiff in the case is offered a lump sum of cash. It is often recommended by their attorney, and the judge, to invest all or some of the proceeds into some form of investment instrument. If the plaintiff’s specific type of lawsuit excludes them from paying taxes on the money received, he or she will still need to pay any taxes off of the profits or interest earned by the investment tool. In many cases, the lump sum of money offers more favorable alternatives to the plaintiff including flexibility of how and when the money can be spent.
Typically, the judge in the case choses for the plaintiff to receive a long-term structured settlement annuity in lieu of receiving a large sum of money. This is often the result of statistics showing that many individuals that receive huge amounts of cash will blow it on big-ticket items. As a result, the structured settlement annuity is designed to protect the plaintiff from their own actions.
Selling the Annuity
There are many incidences where selling a structured settlement annuity makes better financial sense for the plaintiff and his or her dependents. Most states have rules and regulations that must be followed by both the annuitant (the plaintiff) and the purchaser of the annuity. These safeguards are in place to ensure that the annuitant gets the better part of the deal, and fully comprehends exactly how much money he or she will receive once the court approves the transfer. The process begins with obtaining numerous structured settlement quotes from reputable companies that are eager to purchase the annuity.