How did General Motors ruin Christmas?
It was Christmas Eve when a drunk driver hit the Anderson Family’s 1979 Chevy Malibu, causing a big explosion. The 6 members of the Anderson family suffered severe burns, and we’re permanently disfigured.
The family later found out that General Motors’ cheap fuel tank design caused the explosion. After entering into a personal injury lawsuit against GM, the Anderson family won a $4.9 billion structured settlement.
If you’re wondering what structured settlements are, we can help! Read on to learn the in’s and out’s of structured settlements.
Personal Injury Claim
First, there has to be a personal injury claim before a settlement can happen. During the claims process, the defendant can freely offer a settlement or the plaintiff can request one.
For the settlement to proceed, both parties have to agree on the terms. Usually, a settlement is preferable to both parties since going to trials are so expensive. A settlement becomes even more appealing when the plaintiff needs the funds to support themselves.
For instance, with wrongful death cases, the settlement money will help the surviving families. A structured settlement calculator can help determine everything the deceased paid for.
Negotiate Pre Settlement Funding
Have you ever heard of a lawsuit advance? Pre-settlement funding is a type of lawsuit advance. Plaintiffs can access award funds, well before the personal injury case settles.
However, the funds have to pay for the legal costs of their claim. The court usually requests medical records before granting a lawsuit advance.
Structured Settlement Options
A scheduled settlement is typically paid through an annuity. The defendant has to purchase the annuity from an insurance company. Why do defendants use annuities to pay off settlements?
Instead of the defendant having to monitor each settlement payment, with an annuity the insurance company is in charge. Since insurance companies are experts at managing scheduled payments, it makes sense to let them handle things.
Here’s a shortlist of the different type of annuities commonly used:
- Income for life
- Periodic certain
- Deferred defined benefit
- Joint and survivor
Another benefit of getting an annuity is the stability they provide. Instead of relying on the defendant’s corporations doing well, you can rely on the financial health of the insurance company.
You can also sell structured settlement plans to turn a profit. However, not everyone wants to receive periodic payments. That’s why another option is to receive a lump sum payment.
To decide if a lump sum payout is the best choice, you have to determine what your financial goals are. Ask yourself, what are the main differences for each payout option?
How will these differences help you in reaching your financial goals? One of the biggest advantages of getting a lump-sum payout is that you’ll have the freedom to choose how you want to invest a large amount of money.
As far as pre-settlement funding goes, you’ll be happy to know your payout is completely tax-free. However, any type of profit you make off of your earnings is 100% taxable.
Build up Your Financial Know-How
Now you know the in’s and out’s of how a structured settlement works. What other financial knowledge would you like to build on today? For more articles like this one, check out the rest of this site!