How Structured Settlements Can Help Divorcing Spouses
Divorce is complicated, especially when it comes to the separation of finances. In some instances, using a structured settlement to fund alimony or child support provides a more straightforward resolution.
How does a structured settlement work for divorce settlements?
First, the spouses must agree to utilize a structured settlement before finalizing the divorce. Once both parties have agreed to the structured settlement's timing and amount, the receiving spouse releases the paying spouse from liability.
Next, the paying spouse directs the funds to a third-party assignment company, which assumes liability for the payments and purchases an annuity from a structured settlement carrier. The carrier then makes the periodic annuity payments to the receiving spouse.
What are the benefits of using a structured settlement for alimony or child support?
There are several reasons to consider using a structured settlement to resolve a divorce. Here are a few:
For the paying spouse:
- Release of liability: During the structured settlement process, the paying spouse assigns liability for future payments to a third-party assignment company, offering the opportunity to begin post-divorce life with a fresh start.
- Cost savings: Depending on the chosen option, a structured settlement may offer cost savings for the paying spouse while still providing the receiving spouse with the funds they need.
For the receiving spouse:
- Preferential tax treatment: Depending on the type of payment and the date of divorce finalization, payments may be income tax-deferred or income tax-free.
- Reliability: Structured settlement payments are fixed and guaranteed1, so there’s no need to worry about the paying spouse’s future financial situation.
- Flexible design: Structured settlement payment streams can be designed to fit the receiving spouse’s present and future needs, with options available for monthly, quarterly, bi-annual, and annual payments. Future lump sum payments can also be scheduled for more considerable life expenses, such as college tuition.
Contact Sage for structured settlement options today
To determine whether a structured settlement is a good fit for your client, contact your Sage consultant today.
1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.