In the personal injury area there are settlements known as structured settlements that involve the purchase of an annuity on behalf of the injured party and perhaps some cash payment as well. As of 2009, any periodic payments made pursuant to a structured settlement are tax exempt under 104(a)(1) and 104(a)(2) of the Internal Revenue Code. This must be reviewed each time a structured settlement is considered to make sure the tax laws have not changed. These financial vehicles help protect the client from themselves. Statistics reveal that in most cash settlements, 50% of the cash received has been spent within one year. In less than 5 years, statistics show that approximately 90% of the cash received is spent by the client. A structured settlement spreads out payments to the client over a period of agreed upon years in an agreed upon amount. This helps the client against bad advice, friends wanting loans, or bad luck in investments because the payments usually are guaranteed for a period of years. Structured settlements with fixed annuities are guaranteed not to change regardless of what occurs with interest rates or the stock market. The benefits of the chosen annuity can be tailored to meet the clients present and expected needs. The annuity can have a built in cost of living adjustment as well. Essentially, the investment risk is shifted to the insurance company. The experienced attorney should use his own insurance annuity broker in setting up a structured settlement. This is because the plaintiff broker will shop the annuity with many different companies and obtain the best quote available with the best insurance company available. The internal rate of return within the structured settlement annuity,. When combined with the tax savings, offers a low risk product and is usually much higher than other low risk vehicles that are taxable. There are no management fees applicable to a structured settlement which means all the money belongs to the client. Most often, a structured settlement will net substantially more to a client than a cash settlement because the payments are spread out over time and a guaranteed rate of return is obtained.
Catastrophic InjuriesIn catastrophic injury cases not only is a structured settlement a viable option to settle the case but the cost of future care must be carefully considered so the present cash value of the settlement is sufficient to take care of the person for the remainder of his life expectancy. In addition to the obvious medical care needs by treating physicians, there should be a careful nursing care evaluation. The nursing care evaluation should include considerations for bathing/cleansing, shaving, hair care, mouth care, dressing, assisting with nutrition, mobility needs, protection from injury and infection, administering medications, providing for recreation, nursing assistant fees, bed making, ambulation, urinary requirements, and skin assessment. An experienced attorney will also utilize the services of a life care planner to assist in the evaluation of future needs. Once the cost of those needs are established, an economist can reduce those costs to present value in order to properly prove damages.