July 13, 2013 – One of the more common applications of a structured settlement occurs when an injured party allocates all or some of their settlement proceeds to coincide with anticipated college expenses to help themselves or their children or grandchildren pursue higher education.

Courts across America strongly support the use of structured settlement “College Plan” when approving minors’ injury claims.

For good reason.  Structured settlements:

• Flow to the recipient 100% income tax-free (principal and interest) if the settlement is the result of a personal, physical injury
• Payments are guaranteed by the annuity issuer
• There are no management fees, costs or expenses associated with establishing a structured settlement
• There is NO PENALTY if the funds are used for purposes other than college

 

This last one is often overlooked. Think about it:

A prospective student could opt for a career in the military.

A student could earn a scholarship.

Not everyone is college material.

And if you contrast these advantages and disadvantages with those of another popular college savings vehicle, the 529 plan, more differences come into focus.

Named after the section of the United States Tax Code that governs them, 529s are in wide use and can be an excellent way to provide for a child’s or grandchild’s higher education.

But unlike structured settlement payments established to pay out precise sums on precise dates, 529 plans have penalties written into the Code if the funds are not used for qualified education expenses.

Further, when tied to a mutual fund as many are, there is no certainty the value of the account with grow to the desired sum by the time funds are needed.

529 plans are not among the products we currently offer so we have no “dog in the hunt” as they say.

But we thought you’d like seeing a list of states with the BEST and WORST 529 plans based on reported investment performance.

We hope you or your child are never involved in an accident.

But if you are, a structured settlement can be a sensible part of the injury resolution solution and we stand ready to assist as your advocate.