Providing Additional Income for Clients Who Are Unable to Work
Few life events are more destabilizing than losing the ability to work. Employment often bestows a sense of pride, a mental challenge, and perhaps most importantly, a source of reliable income.
Many injured claimants and their families must deal with the reality of adjusting to a new life—one that is no longer supported by the claimant’s prior wages, salaries, or benefits, and those losses require an entirely new approach to ensuring financial well-being.
Are Disability Benefits Enough?
Most adults have access to some form of compensation to help pay bills after an injury, including employer-sponsored long-term disability (LTD) policies and Social Security Disability Insurance (SSDI). The total benefits and coverage timetable depend on several factors, including length of service, work history, and age.
Unfortunately, these types of benefits may not sufficiently cover the many associated costs of living with a catastrophic injury. In fact, as of July 2019, the Social Security Administration (SSA) reported the average monthly SSDI benefit for disabled workers as only $1,236.12. Further, some LTD policies have an offset that allows them to reduce required payments based on the amount of approved SSDI benefits.
Creating Additional Sources of Long-Term Income
Fortunately, there are several strategies for creating long-term income with personal injury settlement proceeds:
- Structured Settlement Annuity: Structured settlements are inherently flexible in design, so claimants who normally depend on a regular paycheck may choose to receive monthly payments over a set period instead of a lump sum. Structured settlement payments are guaranteed1, and the rate of return is locked-in, allowing the funds to grow income-tax free.
- Market-Based Structured Settlement: Injured claimants who seek additional income but have more financial flexibility may want to explore market-based structured settlements. Rather than an annuity, these use a market-based investment portfolio as the underlying financial instrument. Market-based structures offer another tax-free source of income but with the potential for a greater return.
- Special Needs Trust: Depending on the claimant’s long-term prognosis and financial situation, a special needs trust (SNT) may be appropriate. An SNT allows injured claimants who receive needs-based benefits (e.g., Medicaid, SSI) to retain benefit eligibility. At the same time, the SNT beneficiary can use settlement funds to purchase items and services not otherwise covered by their government benefits. Better yet, a structured settlement annuity can fund the SNT, assuring that the SNT will be financed properly for years to come.
Contact the Structured Settlement and Special Needs Trust Experts
Sage Settlement Consulting leads the nation in plaintiff-oriented settlement planning. For more information or assistance with your next case, contact us today.
1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.