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Structured settlements, also known as annuities, have been available since 1982 to provide funding for the settlement of plaintiff personal injury claims. These structures can be a partial alternative to a lump-sum cash payment and provide a stream of income, periodically, typically on a monthly basis. In addition, the structure payments are 100 percent exempt from federal income tax.

Generally, a structured settlement provides payments for the lifetime of the individual. The life expectancy risk is shifted to the life insurance company from which the defendant purchases the structure. The structure typically will provide a guaranteed payout period so that the insurance company is obligated to make payments for the life of the individual, with some minimum number of payments guaranteed against the possibility of an early death.

Structures are most effective in the context of an agreed settlement, such as a mediation. For example, if an agreement has been reached on the benefits due to an injured person in a medical malpractice case, then the defendant will agree to fund that amount even though the settling parties may still have very different opinions about the individual’s reasonable life expectancy.

A structured settlement broker is an independent professional who will obtain quotes from several life insurance companies. The quotes are based on the totality of the medical conditions affecting the individual, not just those flowing from the alleged medical malpractice. During the course of negotiations, the structured settlement broker will provide the parties with illustrations showing the cost to purchase the structure, the estimated payout over the lifetime of the individual, and the guaranteed payout. Life insurance companies compete for this business, both in financial return and in providing an estimated “rated age” for the individual. For example, in an extreme case, an 8-year-old child can be given the life expectancy of a 75-year-old. This means that the insurer will make higher payments because it calculates the total life expectancy to be relatively short. (Payments will nevertheless continue for the life of the individual.)

Whether the structured settlement broker appears as a consultant to the defendant or to the plaintiff, he or she should be given access to all current medical underwriting information so the most favorable rated age can be obtained. It also is important that the parties, particularly the structured settlement broker, understand the injured person’s reasonable life care needs. For example, if he or she requires 40 hours of attendant care per week for 10 years, and then 60 hours per week thereafter for life, the periodic payments can be structured to meet these needs.

A structured settlement annuity is not always appropriate. However, in larger cases where there are sufficient monetary resources for an up-front cash payment and a structure, the structure can provide flexibility, with guaranteed payments for the life of the injured person, regardless of the investment outcome of the cash portfolio.

In many cases, there should be a sufficient lump sum for immediate needs, such as a home, vehicle, vacation and repayment of debt. The mix of cash and structure should be tailored to the expected needs of the injured person – which should, in turn, be determined by taking advantage of available resources such as Life Care Plans, financial advisors, structured settlement brokers, and special needs trust counsel.

Special Needs Alliance members are available nationwide.

To contact a member in your area, call 877-572-8472, or visit us online at www.specialneedsalliance.com.

Providing the best quality of life requires informed decisions.

The best way to provide your special needs child with compassionate care and a comfortable life is to support your legal and financial decisions with reliable information and proven expertise. That’s why America’s finest disability attorneys have combined their talents to create the Special Needs Alliance.

As attorneys in the field of Disability and Public Benefits Law, we help to enhance your child’s quality of life. Every member of the alliance has the resources and legal expertise to help you maintain public benefits for your child and develop effective estate plans that protect your assets.

Striking Settlements

This brochure is provided as a service of Special Needs Alliance and is informational only. It is not intended to serve as legal advice or replace the advice of a legal professional.

Special Needs Alliance members are available nationwide.

To contact a member in your area, call
or visit us online at

Call (720) 200-4025 now or email us to find out how our attorneys can help with your Special Needs Trusts issues.

Bradley J. Frigon is a Denver Estate Lawyer Firm in Colorado. Our main offerings include: Elder Law Lawyers for protecting assets and an Estate Planning Attorney for all aspects of wills, trusts and estate administration.

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