Non-Physical Injury Annuities
You’ve reached a settlement in your client’s non-physical injury case. After allocating funds to pay attorney fees and costs, your client has a portion remaining that they can take in cash. If your client does so, they will pay income taxes based on IRS income tax rules. However, there is another option.
We know that your clients’ settlements will never be nearly enough to make up for their losses, so handing a big part over to the government in taxes can be especially difficult. That is why non-physical injury annuities, called “Non-Qualified” structured settlements are a wonderful tool for those settling non-physical injury cases.
A “Non-Qualified” structure prevents the entire non-physical injury settlement from being taxed in the year you settle. The structure allows the settlement funds to grow tax-deferred.
Non-Qualified Structured Settlement Benefits
Article on Non-Qualfied Structured Settlements by Kelly Ramsdale
TYPES OF CASES ELIGIBLE FOR NON-QUALIFIED STRUCTURED SETTLEMENT:
- Employment (exclusive of lost wages)
- False Arrest
- Breach of Contract
- Sexual Harassment
- Punitive Damages
- Property Damages
- Entertainment & Endorsement Income
- Environmental Claims
- Psychological / Emotional Distress
- Coverage Buyouts
- Property Disputes
- E&O, D&O Claims
- Some Estate Distributions
- Deferred Compensation
WHEN SHOULD YOU CONSIDER A “NON-QUALIFIED” (TAX-DEFERRED) STRUCTURED SETTLEMENT IN A NON-PHYSICAL INJURY CASE?
- A minor or incapacitated person is involved.
- Income replacement is important.
- The plaintiff isn’t an experienced financial expert.
- The plaintiff is risk averse. Many financial vehicles come with risk, which many plaintiffs and their families are not excited about.
- High wage earners don’t need the money at the time of settlement. They can let the funds grow tax-deferred until they need them.
- The plaintiff isn’t considered legally “incapacitated,” but may be vulnerable to people who would be harmful to the preservation of the settlement proceeds.
ADVANTAGES OF A “NON-QUALIFIED” STRUCTURE
Having your clients choose Non-Qualified structures for their non-physical injury situations provides them with several benefits.
- Your clients will not have to pay taxes immediately on the amount of the settlement that is put into a non-qualified structured settlement. Taxes can be deferred and are due in the year when payments are distributed.
- Your clients will have peace of mind knowing that the benefits are paid by some of the largest life insurance companies in the United States. These companies are highly regulated and safe.
- Their structure plans will be tailored to meet their financial needs.
- Because the non-qualified structured settlement is based on a fixed interest rate, it is not subject to the ups and downs of the financial markets. Your clients will know exactly how much they are going to receive and when those payments will arrive. No guesswork or stress.
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