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The “Original” Structured Settlements

(NOTE: Some blogs simply cannot be improved upon.  Here’s one we couldn’t have said better ourselves.  The following is reprinted in its entirety with permission from The National Structured Settlements Trade Association)

Some structured settlements may offer significant advantages

Kudos to CBS News financial writers Larry Swedroe and Tiya Lim for today’s CBS News’ post on structured settlements.  Swedroe is a principal at Buckingham Asset Management in St. Louis and Ms. Lim is the firm’s director of Institutional Advisory Services.

Here’s an excerpt:

A structured settlement offers advantages that you can’t get anywhere else. Let’s start with the tax benefits. All income from your annuity is exempt — not deferred but completely exempt — from federal and state taxes. Your payments are also exempt from taxes on interest, dividends, capital gains and the dreaded AMT.

With taxes almost certain to rise in coming years, that’s not a bad place to be.

A lawsuit settlement may be your one-time chance to protect your finances for years or even decades. The IRS makes structured settlements very attractive. Consider taking the agency up on its offer.

Swedroe’s analysis goes on to explain how an accident victim can potentially maintain eligibility for private and government needs-based programs by irrevocably funding a special needs trust with payments from a structured settlement.  For a free NSSTA handout explaining this in more detail, please click here.

This commentary is a timely reminder about the importance that accident survivors should attach to financial security and guaranteed regular payment streams.  Wild swings in the stock market can make long-term planning more difficult (see here), especially when payments continue to be deducted during depressed times.  By contrast, a structured settlement offers the security of a tailored future payment stream that is not subject to reductions due to interest rate or stock market changes.

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