26
LOW INTEREST RATES DON’T MAKE STRUCTURED SETTLEMENTS A BAD DEAL by H. Dennis Beaver, Attorney at Law
Y
ES, INSTEAD YOU might be able to get a better rate of return elsewhere, but for personal injury settlements, the guaranteed tax-free income of a structured settlement is well worth anything you may be giving up. “Three of my former employees were in a serious auto accident while on a fishing trip, which will result in large settlements for their future care and lost income. “Physically they are no longer able to perform their jobs and will have trouble finding the same level of income going forward. They have little investing knowledge or adequate experience to manage their financial future. “There is a family fight going on right now over what to do with their settlements, which will be several hundred thousand dollars each after legal fees. Their adult children want the proceeds put into stocks and bonds at a large brokerage firm. Others in the family are suggesting CDs and municipal bonds to ensure safety. Their lawyers are strongly suggesting structured settlement annuities.
RES IPSA LOQUITUR
“Given today’s low interest rates, what is your recommendation? Thanks, Theo from Chicago.” Financial planning after an accident: What you need to know. FINANCIAL PLANNING AFTER AN ACCIDENT—WHAT YOU NEED TO KNOW Theo is smart to raise this question before these settlements are final as financial planning for an accident victim is usually far more complicated than for a typical person. Also federal rules offer significant tax benefits to injury victims but only if certain steps are taken before the final settlement. I ran Theo’s question by Peter Arnold, who has been in the structured settlement field for more than 20 years and was formerly deputy director of the National Structured Settlements Trade Association: “The federal tax code gives two important benefits to accident survivors who agree to have some or all of their settlement placed into a structured
settlement annuity,” Arnold explains. “First, 100% of that income is tax free. You won’t pay any federal, state or local income taxes, no interest or dividend taxes, and no alternative minimum tax.” “Second, you get guaranteed payments to match future needs—things like wheelchair replacement, therapy or future surgery. That relieves accident survivors from the stress of making appropriate
