Structured settlement brokers advise lawyers of various types of annuity plans available to their clients or assist in arranging the sale of future annuity payments. This type of settlement is used to provide long-term compensation to individuals who were injured due to another person’s negligence such as automobile accidents, workplace injuries, and medical malpractice.
Structured settlement brokers can be instrumental in negotiating offers. Brokers not only comparison shop for the best deals, they provide invaluable advice to lawyers and their clients to determine if this type of financial arrangement is the best option.
While injury compensation is the most prevalent use of structured settlements, annuities are also used to payout jackpot lottery winnings. Brokers can help lottery winners weigh the pros and cons of accepting the payout over 20 years vs. lump sum cash.
A unique feature of structured settlements is they can be developed to suit future financial needs of Claimants. Monetary amounts are based on a variety of factors which include current and future economic conditions along with life expectancy of Claimants.
When brokers develop financial proposals they first assess Claimant information including: credit score, employment history, and health status. Life care plans are analyzed to ensure Claimants receive proper compensation for future living expenses and medical care.
Factors which determine life expectancy include: smoking; alcohol consumption; and history of cancer, heart disease, diabetes, obesity, and other health concerns. One of the primary objectives of brokers is to determine if Claimants qualify for a substandard rating.
Annuity payments are guaranteed by life insurance companies. Premiums are based on risk level ratings which include: Preferred, Standard, and Substandard. Claimants with substandard ratings are often declined life insurance policies. However, with annuities a substandard rating can sometimes provide a better rate of return.
Annuity payments provided as compensation for injury are tax-exempt, while annuities for lottery winnings may be subjected to federal and state taxation. Life insurance companies engage in investing practices to provide Claimants a higher rate of return. Proceeds earned through investments are subject to taxation for both injury and lottery settlements. If future annuities are payable to an estate they are subject to estate tax.
Annuity payments can be structured to suit the needs of the Claimant and can be paid monthly, semi-annually, annually. Installments can be equal amounts or vary. For example, if Claimants require customized medical equipment that must be replaced annually, the structured settlement can provide additional funds each year to cover expenses.
It is crucial to ensure structured settlements are precisely the way they should be before signing the agreement. Once in place, structured settlements cannot be changed without court authorization. However, in some states Claimants are allowed to sell future annuities for lump sum cash.
When selling annuity payments it is important to work with a broker who does not have an exclusive agreement with the buyer. Honorable brokers work with multiple buyers to obtain the best deal for the seller, not for their self.
It is recommended to work with a structured settlement broker registered with the Department of Justice. Brokers should also be insured against errors and omissions. It can be beneficial to conduct research to ensure brokers have a good reputation and can be trusted with sensitive information.