Features of Structured Settlement Funded by an Annuity

Tax Benefits - structured benefit payments, which can only be set up at the time of settlement. are tax-free. Lump sum awards are tax-free, too, but once a claimant has received a lump sum payment or judgment, the tax benefits stop. Interest earned by investing the lump sum does not receive special tax treatment. By contrast, the tax benefit of a structure continues, and can even become more valuable if the individual's tax bracket increases.

Planability - a structured settlement gives a claimant a way to plan his or her future cash flow. The high degree of flexibility possible with structures gives a claimant an opportunity to arrange a benefit schedule to suite his or her own needs and preferences.

Spendthrift Protection - Through a structure a claimant can protect himself against the normal tendencies of human nature and unpredictable events that can erode a lump sum settlement.

Transfer of Mortality Risk - a claimant who takes the entire settlement as a lump sum, with the intention of investing it himself or herself, can be in a difficult position.  The only way to guarantee that the investment income will last for their whole life is to keep all or at least a substantial part of the principal in reserve, and spend only the interest. Through a lifetime structure they can receive the benefit of the entire amount used to fund the structure, and still be assured that the income will continue for the rest for their life.

Professional Money Management - a claimant who accepts a structure receives payments from one of several highly rated life insurance companies, each of which has several billion dollars in assets and is regulated by a state insurance department. For a claimant who intends to invest a portion of the settlement proceeds himself or herself, the structured part of the claim settlement becomes, in effect, part of a diversified financial plan.

Control - All in all, a structure is a device through which a claimant can exercise a great degree of control over their financial affairs.