Designing your Structured Settlement… What are your options?
There are many different forms of structured settlements; all vary by type and length of compensation. Therefore, settlements are structured to fit individual victims’ needs, and a professional should be consulted as to what works best for each client. The following is a list of the most common types of payouts used in designing your structure.
Lump-Sum Annuities are intended for special future needs such as education, medical bills, retirement, etc. Payments are deferred to a fixed future date and the most common lump sums are chosen with a guarantee clause that will make payments to either the annuitant or a beneficiary, should the annuitant pass away.
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.
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