Structured Settlement Pros and Cons

Structured Settlement Pros and Cons

Structured annuities are ideally suited for many different types of cases. For additional information on how work, payout options, or how to access your cash ahead of the annuity contract schedule, the Structured Settlements FAQs page can be a beneficial resource.
These scheduled payments offer a number of advantages. When deciding on any financial investment, it is important to understand the benefits along with the risks.

Pros of Structured Settlements

• Payments are tax-free.
• In the event of the recipient’s death, the heir can continue to receive tax-free payments.
• Payments can be scheduled for almost any length of time and can begin immediately or be deferred for as many years as requested. They can include future lump-sum payouts or benefit increases.
• Spreading out payments over time can reduce the temptation to make large, extravagant purchases and guarantees future income. This is especially helpful if the recipient has a medical condition that will require long-term care.
• Unlike stocks, bonds and mutual funds, structured settlements do not fluctuate with market changes. Payments are guaranteed by the insurance company that issued the annuity.
• A structured settlement often yields, in total, more than a lump-sum payout would because of the interest your annuity may earn over time.

Cons of Structured Settlements

• Once terms are finalized, there’s little you can do to alter them if they do not meet your needs. You cannot renegotiate the terms if your financial situation or the overall economy changes.
• Funds are not immediately accessible in case of an emergency, and the recipient cannot place a lump-sum payout in other investments that carry higher rates of return.
• Tapping into your structured settlement without selling payments will cost you money. You will pay surrender charges and IRS penalties if you withdraw funds before age 59½.
• Some parts of a settlement, such as attorney’s fees and punitive damages, can be taxed.
• Not all states require insurance companies to disclose their costs to establish a structured settlement or lump-sum annuity. Without this information, a recipient could lose a significant amount of money through administrative fees.

source  : https://www.annuity.org/structured-settlements/

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