What’s a fair compensation award for someone who became disabled after an accident? How do you compensate someone for a wrongful imprisonment situation? Those very questions are what led courtrooms to start awarding structured settlements.
Structured settlements are long-term periodic payments. They’re awarded after a lawsuit. They’re meant to support injured victims and their dependents.
Are you considering a structured settlement arrangement? Are you wondering what types of settlement are available? Read on to learn about the most common types of structured settlements.
1. Life Annuity
Life annuities are the most basic and simplistic type of structured settlements. As intended, the plaintiff will receive periodic payments for a guaranteed time.
This period of time gets agreed upon as a part of the arrangement. It’s also usually based on your life expectancy.
So, what happens if you pass on before collecting your payments? You can name a beneficiary who will continue to collect the payments.
2. Temporary Life Annuity
A temporary life annuity pays you for a specific number of years. This period isn’t determined based on your life expectancy, though. It’s often based on other things.
Unlike a life annuity, though, you can’t name a beneficiary. That means if you pass on, your benefits stop immediately.
3. Lump Sum
A lump sum annuity provides a chunk of money on a specific date. This future date means you’ll receive a waterfall of money, but not until much later. If you choose this option, make sure to specify whether it’s contingent on you being alive on that date.
4. Survivor Annuity
A survivor annuity gives payments to you and then to your beneficiary when you pass on. Unlike a standard life annuity, you set up your beneficiary right away. If anything happens, you can rest assured that the other party will stay covered.
5. Other Options
The type of structured settlement you choose gets fixed upon finalization. That means there’s not much you can do to change it or renegotiate later. So, what are your options if your financial situation changes?
If you need your cash, then you have a few options. You could withdraw your funds early, but you could get hit with IRS penalties. You might also lose money to administrative fees, surrender charges, and other costs.
You can opt to sell your payments in exchange for fast cash to a settlement company, too. Learn more about your options to ensure you’re making the right choice.
Types of Structured Settlements and How They Can Help
Structured settlements can help provide you with a stable income for years to come. They can also present challenges, though, if you need a good chunk of your money before a scheduled pay day.
Luckily, there are businesses that can help you get a lump sum if that’s what you’d prefer.
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