The agreed-upon settlement for an auto accident might call for payments that get made over time. That arrangement is called a structured settlement.
Do these settlements relate to annuity payments?
An annuity company arranges for monthly payments to the awarded plaintiff. The annuity company handles money that it gets from the defendant’s insurance company.
Some companies charge a fee for providing that service. Some plaintiffs elect to make use of annuity payments, if they have been awarded a great deal of money. The delivered payments come from a pool of money that has already lost the funds that were part of the lawyer’s contingency fee.
How a plaintiff can benefit from utilization of an annuity system?
The plaintiff does not risk the chance that the awarded funds might not get managed properly. Annuity companies understand how to manage money in a way that is financially sensible. The distribution of the awarded funds proceeds over a longer period of time. As a result, the same funds do not get used within a short period of time.
If the plaintiff does not control the funds, then the government does not tax the awarded money. If the plaintiff controls the funds, any money received as punitive damages can be taxed. The system used can undergo changes, so that it better-suits the needs of the plaintiff. That includes the plaintiff’s ability to ask for a lump sum, in place of the monthly payments. The plaintiff knows the scheduled date for delivery of a monthly payment.
How drawbacks associated with the annuity system can create challenges for the plaintiff?
The plaintiff might want to control the funds. If that proves to be the case, then the government has the right to tax any money received as punitive damages, or money that serves as reimbursement for lost income. The funds dispersed by the annuity company come from the defendant’s insurance company. If the insurer becomes insolvent, the plaintiff no longer receives the expected payments.
The structured arrangement cannot be changed, even if economic conditions change. The Personal Injury Lawyer in Hamilton knows that the plaintiff cannot ask for a larger or smaller monthly payment, although plaintiffs do have the right to seek the remainder of a lump sum payment. Because the annuity company charges a fee, the plaintiff might receive an amount of money that is smaller than the size of a lump sum payment.
The plaintiff must utilize the received funds in a manner that matches with the scheduled delivery for each payment. If the plaintiff has no other source of funds, then he or she must operate with a fixed income. If a plaintiff has taken out a loan, in order to cover expenses, that loan must be repaid. Utilization of an annuity system would not allow for easy repayment of that same loan.
Repayment of a loan can serve as a means for improving a credit score. Plaintiffs that use an annuity system could find it harder to improve their credit score, even after being awarded a generous compensation package.