Smart Financial Options for Non-Personal Injury Settlements
Injured claimants rely on income tax-free structured settlements as a means to preserve their settlement proceeds for the future. But what about claimants involved in non-injury cases—can they still benefit from tax-advantaged structured settlements?
In short: yes, they can! But there is a caveat when it comes to taxes. While non-injury claimants are ineligible for tax-free structured settlements, many are eligible for income tax deferral.
Why Structure the Settlement?
The Employee Benefit Research Institute predicts an alarming shortfall for many Americans in terms of retirement savings. Your clients need to proactively consider how they’ll handle their settlement proceeds. For many, a settlement represents the largest sum of money they’ve handled at one time, and it can make a substantial difference in their long-term quality of life if handled appropriately.
It’s important to connect your client with an experienced settlement consultant before their case settles, as the decision to structure the settlement must be made before finalizing the settlement. Certain language must be included in the settlement documents, and your settlement consultant will walk your client through their available options. Here are some to consider:
Non-Qualified Structured Settlement Annuity
With guaranteed payments1 and the ability to defer tax liability until the year(s) in which payments are received, non-qualified structured settlements are an excellent vehicle for claimants who want to sustain predictable cash flow. The claimant determines the schedule of payments ahead of time, allowing for a customized payment schedule.
Numerous types of claims are eligible for a non-qualified structured settlement, including:
- Employment litigation (e.g., wrongful termination, sexual harassment, discrimination, and mental anguish)
- Construction defects
- Contract disputes
- Punitive damages
- Environmental claims
- D&O and E&O claims
Claimants with a little more financial flexibility may want to consider another option—market-based structured settlements.
Market-Based Structured Settlement
A market-based structured settlement uses the settlement proceeds to fund a market-related investment portfolio. The claimant can choose the risk/return profile that works best for them and can even use their own financial advisor to manage the funds as a part of their comprehensive wealth management plan. Payments can be arranged to be received quarterly, semi-annually, annual and/or in future lump sums.
Is your client on the fence over which option to choose? Claimants have the option to choose a mix of fixed income and market-based income by combining a structured settlement annuity and a market-based structured settlement. Again, though—the decision must be made before finalizing the settlement.
Contact the Structured Settlement Experts
Sage Settlement Consulting is the nation’s largest plaintiff-oriented settlement consulting firm. Contact us today to learn more about structured settlement options for non-qualified cases.
1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.