No matter where you are, at home, at work, driving in your car, you can become the victim of an accident. Typically, before you know you are having one- it’s over. There are usually no warnings for you to see or clues that might avert you from them, they are just events that happen unexpectedly, and if you are fortunate- they will not damage you or your property too badly. But if you have been involved in an accident, and it leaves you at a disadvantage, you do have recourse.
In America, almost everyone everywhere carries some kind of insurance to provide for just such occasions. If you drive a motorized vehicle; that vehicle is required by law to have some sort of insurance on it to protect the person and property. If you own a house; that house usually has not only an insurance to protect everyone in it, but also insurance to protect the mortgage company from losing their investment. If you own a business, the law also requires you to carry insurance to provide for someone hurt there, even if it was nobodies fault. While America is expensive to live in, it could be a lot more expensive in more ways than one. What if you were damaged in such a way that it left you or your family with a permanent disability; or death?
Often times, when someone has been damaged and is awarded a claim under these circumstances, it can be a very large sum that should provide for a fair amount of time. But how many people know how to handle such large sums? Not too many.
It is not uncommon that someone who is awarded a settlement, has gone a long time without income, and has therefore amassed a certain amount of debt, both medical and personal. It is tempting to take all this money and just pay everyone off- but that is actually one of the worst things you can do.
To start with, if an individual takes a large sum of money up front, this will put them in the highest tax bracket, and they will end up paying way more in taxes than if they annuitize the money over time.
Annuitizing the money will accomplish a few things. Most importantly, it will spread out the payment, so you will not burn through it in the next 24 months, and it will guarantee that you have your basic expenses covered for however long the annuity is set. Most people loose sight of the fact that this was the purpose of being awarded ‘pain and suffering’ in the first place, was to support you while you healed, not buy you a new car and world cruise.
Another perk to annuities are that they will be earning even more money while they are sitting, and being allocated to you monthly. The interest your money will bring in, if the settlement is large enough, can sometimes be equal to what you are being paid- so theoretically, you will never run out. This is known in the financial world as “generational wealth”, and if set up properly, is the best way to go. But then again, you have to have a very large chunk of money to make one work effectively.
If you have any creditors that are just waiting for you to come into some cash, annuities can often times limit their claim on you, or in some cases eliminate them altogether. If this is your case, make sure you get good counsel before you accept any settlement payments.
Structured settlement payments are very often used in personal injury cases because they help restore stability to your life, something you probably need most after a damaging experience, and subsequent court battle. So in summary, these structured settlements will annuitize payments over a fixed amount of time, actually make money in the process, and minimize taxes. Generally speaking, taxes are not paid on personal injury settlements unless the settlement is made for punitive or exemplary damages; then you will be liable for some tax.
Make sure that you speak with both a tax attorney and a personal injury attorney in your own State before you make these kinds of decisions. To find out more, contact Ledger Law Firm at 800-300-0001, or go to www.LedgerLaw.com for more information. This is a big decision, don’t make it alone.
