Taxes and Structured Settlements

Taxes and Structured Settlements

February 18, 2013 – An article from last week’s issue of Claims Journal serves as a timely reminder to claims professionals everywhere of the interconnectivity between structured settlements, the current debate on income taxes and effective claims resolution.

In short, rising tax rates make tax-free income more attractive when settling injury claims.

This is but one of the messages the author deftly carries in his excellent article “Higher Taxes Make Tax Free Structured settlements a Compelling Option.”

Compelling is the operative word here.  Not only are structured settlements compelling to those on the receiving end of the future cash flows, they are also compelling as tools to help claims professionals properly address claimants’ future needs and design settlement offers to better meet those needs.

Being aware of the tax implications can help swing the dialog to a more practical settlement discussion.

While this particular article is necessarily focused on traditional structured settlements which are in compliance with Sections 104(a)(1) & (2) of the Internal Revenue Code for personal, physical injury, an even greater case can be made for their value when implementing non-physical injury structured settlements.

Because many personal injury settlements arise from disputes which are non-physical in nature (employment disputes, punitive damages, copyright infringement and discrimination to name a few), the tax implications of these completely settlements can be even more pronounced.

Structured Settlements Work!This last message is one we have been broadcasting as loudly as we know how in many of our previous newsletters and blog posts.  Since taxes can seriously erode the value of taxable settlements occurring (especially) at the higher resolution values, choosing a non-physical injury structured settlement can often mean the difference between walking away with a good portion of your settlement and writing a heftier-than-necessary check to the government.

We prefer to see our clients keep as much of their recovery as possible.

We created a helpful webinar entitled “Taxable Damages:  Mitigating Your Tax Liability with a Structured Settlement” to help clients better understand the implication of taxes on their non-physical injury settlements and hope you’ll call us anytime we can be of assistance to you or someone you know.

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