A Structured Settlement is essentially an agreement under
which an insurance company agrees to pay an individual a predetermined amount
of cash for a fixed length of time if the individual meets an accident. The
documents generated in a structured settlement include an agreement, a
qualified assignment, an annuity application, a court order if a claim is made
by a minor, and an annuity policy.
Payments for a structured settlement annuity can be made for
the duration of the life of the claimant. The amount paid can comprise of equal
installments, installments of varying amounts, and lump sums. The payments from
a Structured Settlement Annuity are free from income-tax and are guaranteed by
contract. Since a structured settlement annuity is meant for long-term
financial security, it is important to get an assurance of the credentials of
the annuity provider.
The periodicity of payment is entered into the settlement
agreement. Factors that individuals can consider in deciding upon the date of
commencement of payment, duration, and periodicity include monthly expenses,
present age, extent of hazard in occupation, and retirement plans. In order to
ensure that the payments remain tax-free, the structure of payments should not
be altered once it has been agreed upon by both parties. In the case of a
qualified assignment, the insurance company making the payment can transfer its
obligation for payments to a third party.
There are issues that one should understand before opting for
a structured settlement agreement. If payments are made to an estate, they are
free from income tax but subject to estate tax. Purchasing a structured annuity
can affect the availability of ready money with an individual.
State and federal laws govern the closing of a structured
settlement. The closing process usually gets completed in 3-6 months. Federal
laws stipulate that a court order be obtained by either the customer or the funding
company that is purchasing the payment stream so that there are no tax
liabilities. The manner in which the court order is obtained is regulated by
various “Structured Settlement Protection Acts”, which are in force in 36
states in the United States.
A disclosure statement is made available to a customer 3 to
14 days before he receives the transfer agreement. The disclosure statement
mentions the amounts to be paid to the customer and their due dates; the IRS
Discounted Present Value of the amount at that given point in time; the Gross
Advance Amount and the Annual Discount Rate; disclosures desired by the state;
and a list of the fees and commissions incurred.
It is advisable to avail attorney advice before going in for
a. In fact, in some states, it is a precondition to acquiring a structured
settlement annuity. However, depending upon the laws being used for the
transaction, customers do have the option of waiving legal representation in
the Transfer Agreement or obtain an Estoppel letter from their attorney.
The funding company commences payment to an individual after
acknowledging the assignment and receiving a court order. The payments start
30-45 days after the receipt of the court order. Ready to cash out of your structured settlement?
source:http://www.structured-settlements-guide.com
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