Personal Injury Structured Settlement

Discussion in 'Annuities Forum' started by Billyboy74, Jul 30, 2017.

  1. Josh
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    Josh Well-Known Member

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    A lot of interesting dialogue on this thread so far. The first thing a financial advisor (or whatever they want to call themselves these days) should do, is actually assess where you're at in terms of your financial picture such as assets, debt, expected income, goals, etc. A lot of the answers to your question are going to be more closed based on things like how old you are and what type of purchases you plan on making (or not making). There are a LOT of people that sell financial products, but aren't really good at dealing with your total financial picture. I think DHK is a GREAT example of someone who really understands that planning your financial future has a lot of moving pieces and most professionals lack his depth of understanding.

    If this is a significant amount of money, you should definitely interview advisors. It may very well be that your advisor isn't greedy, but is just inexperienced and/or lacks the proper training/products to really help you.

    The best way to avoid taxes is not to make any money. Since that's impractical, focus on paying taxes *efficiently*. Two years ago I wrote Uncle Sam a check for $52,876 dollars because I had a better year than I had expected. If I had done poorly that year I wouldn't have had to pay anything, but I like making money too much to use that tax strategy.

    With respect to protecting your assets, it sounds like you're trying to use the "blood from a stone" defense by locking assets up or something equally obscure. What you should look at is getting a personal umbrella policy which will cover you if someone wants to sue you under most circumstances of personal liability. That policy will have minimum coverage requirements for your other liability insurance (auto, homeowners, etc) and in the event a claim happens they'll be the ones providing your defense and such, all of that comes at a fairly reasonable price. I like the umbrella policy because it actually helps deal with the litigation and the liability as opposed to just trying to hide/protect assets.

    Feel free to share the dollar amount of the settlement if you're comfortable with it (or a range), the larger the settlement the more doors can open for you in terms of companies to help you manage it.
     
  2. VolAgent
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    VolAgent Well-Known Member

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    First of all, I am not familiar with the tax or asset protection laws of California, which will play a big role in this decision.

    On the face of it, an annuity would be a good fit for part if not all the money we are discussing. Part of that just depends on the amount involved and just how risk adverse you are. Obviously it is hard to say for sure without knowing more.

    However, the fact you are on here asking opinions suggests that you are not completely comfortable with the recommendation you have received. To me, that means one of two things will eventually happen.

    1. You will continue to look around until someone makes you completely comfortable, which may never happen. This person's advise may or may not be better than what you have currently received. However this person has made you feel comfortable so you are ready to act. And I'm sure part of your discomfort is the amount of money involved, I suspect to you it is sizable (which is relative).

    2. You will go ahead and proceed with your advisor's recommendations even though you aren't truly comfortable with them. Whether the advice is good or not, you will constantly second guess the advice and yourself for acting. Probably to the point you just sour on it all.
     
  3. scagnt83
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    scagnt83 Well-Known Member

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    In the current rate environment, CDs are the equivalent of putting your money to sleep.



    Anyone who makes blanket statements about annuities, especially to the effect of "how bad they are", is clueless about the subject.



    $400k only produces around $16k per year in retirement income. Not exactly bragging status for a retiree. Of course, if you used an annuity, you could generate more than $16k per year. It's still not a livable income on its own any way you go about it.

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    An annuity could possibly be a very good fit.

    It does provide safety from creditors. You need to check state laws for CA.

    It can provide guaranteed income that is higher than most other options.

    Part of the income received will likely be excluded from taxes (unless CA has specific laws about taxation regarding settlements).

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    You should share your age and exactly which annuity is being recommended. We could help more with that info.

    There is nothing else that provides the combo your looking for without utilizing a living trust of some type.
     
    Last edited: Aug 1, 2017
  4. Golfnut2112
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    Golfnut2112 Well-Known Member

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    I would read up on mutual funds, not all of them follow the stock market.
     
    Last edited: Aug 2, 2017
  5. Billyboy74
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    Billyboy74 New Member

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    Its about $4million. The advisor is recommending about half into a fixed annuity. Some to invest and some to keep. She is not commission based which is good.

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    It is around $4million

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    It is a fixed annuity for an injury settlement. It is completely tax free and we like that it keeps it safe from being sued.
     
  6. IamChange
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    BillyBoy, is your personal injury case already settled? If so your lawyer did you a major injustice by not speaking with you about structured settlement annuities. When a portion of your personal injury settlement is "structured," you receive that money and its interest TAX FREE as a part of your settlement. The judge would look at and approve the structure and its terms, which usually only accounts for a portion of the total settlement money. If it was a small settlement(say, under $100-200k) it's reasonable to have skipped the structured settlement but a larger settlement like yours should have been partly structured. The lawyers don't like structures because it causes a small delay in the final settlement and thus a delay in receiving their fee, but IMO it should be unethical to do this. If you put some of this settlement money into an annuity post settlement you will be liable for taxes on the gains. If the case is already settled you will not be able to go back and re-negotiate the settlement to take advantage of the special tax treatment of a structured settlement annuity.

    If the advisor is a broker for the defense I would have your lawyer request the involvement of someone like myself who is a plaintiffs broker who will help you get the best deal (the commission comes out of what the defense was going to pay their broker, so it's another way to stick it to the defense). If you are able to structure a portion of your settlement through the court that is by far the most preferable way to go due to the tax advantages and flexibility in structuring the payments. Further your total payments received may exceed the original $4 mil. Not many advisers are versed in the benefits of structured settlements so it would be normal for your advisor to not bring this up. I do have experience working with and placing structured settlement annuities on the plaintiff's side - I have never worked for the defense (i.e. the insurance company you're suing).

    You haven't mentioned the size of the settlement in relation to your expected future income and costs. Is your ability to earn income temporarily or permanently impaired and to what degree? Do you have ongoing medical expenses? Do you have permanent ongoing lifestyle costs as a direct result of the injury? It is very difficult for me to say how suitable an annuity would be without knowing more about your circumstance. More hardship generally means a greater need for certainty in your future income stream and a greater need for structured amounts. If you have a lot of injury related debt that would be a good reason to structure less.

    Do you have any immediate plans to spend a portion of the settlement money? For your sake, I hope you're keeping quiet the amount of money you're about to receive because you could have friends and family asking for loans, proposing business ventures, etc. You can use your advisor or the investment vehicle (annuity) as a shield against short-sighted spending and requests for hand outs.

    Your goals are at odds and I think you should prioritize; you can't have everything. If you want your money safe from creditors/lawsuits and generating income you're going to sacrifice some returns to get the protection. You can't maximize returns/income AND pay little to no taxes. You'd have to rank these criteria in order from most important to least important for an advisor to properly guide or recommend a solution.

    If your priority is protection and guaranteed income, an annuity may do the trick. An annuity is not a vehicle for maximizing your returns which is why you'll want to invest a portion of the settlement money for the long haul. More specifics about your life situation are really what's needed to make a recommendation & it may be beyond the scope of what you can get out of an internet forum.
     
    Last edited: Aug 17, 2017

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