Life Annuities are intended to provide a guaranteed stream of income from the structured settlement in order to maintain one’s current standard of living. The payment schedule can be made monthly, quarterly, annually, etc. The following are all examples of different payout methods for such annuities:
- Life With Period Certain – includes a death benefit that will guarantee payments for a fixed number of years. The number of years is based on the life expectancy of the annuitant (contract owner) and payments are made for the latter of the period, or for life. Should the annuitant pass away prior to the contract maturing, the designated beneficiaries would be paid only for the remaining fixed years.
- Period Certain – the annuitant chooses a specific time period for which he/she will receive payments. Once that time frame lapses, the annuitant will not receive anymore payments. In essence, it is possible to outlive your payments under this type of option. Advantages of period certain annuities are that they offer a higher payment than one would find in a Life with Period Certain annuity, for example.
- Temporary Life – payments are made for a designated number of years, contingent upon the annuitant living. There is no payment to a beneficiary should you pass away and, therefore, the annuity terminates upon death or at the end of the designated years of payment.
- Life Only – guarantees payments for life, with no beneficiary option.
- Joint Survivor – most commonly used for married couples, where payments will continue to surviving annuitant upon death of the primary. Payments continue at either the same rate or as a predetermined percentage of the original benefit.
IRS Code 104(a)(2) stipulates that periodic payments in the form of a structured settlement are 100% tax-free
The schedule of payments is determined at the front end of the transaction, resulting in a steady source of safe, reliable income for the claimant.
Rate of Return
With a locked-in rate of return, injured claimants can rest assured that market volatility will not affect their structured settlement payments.
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