Frequently Asked Questions
What happens to my annuity payments if I die?
Your annuity payments will flow directly to the beneficiary named in the documents. The default beneficiary is your estate, but (in most circumstances) you may designate a specific beneficiary. Contact us and we will send you the appropriate form to complete.
Can I change my beneficiary?
In most circumstances, yes, you may change your beneficiary as often as you would like. Contact us and we will send you the appropriate form to complete.
Do I need to report my annuity payments at tax time?
If your case was a Qualified Case (a physical-injury or wrongful death case), then no – you will have nothing to report to the IRS. Your payments are tax-free pursuant to the Internal Revene Code (IRC) Section 104(a)(2).
If yours is a taxable case, then the life insurance company will send you an IRS Form MISC-1099 the year payments are made.
Please call us and we will review your case documents to let you know if your case is tax-free or taxable. We always recommend you contact a tax expert to fully answer your questions.
I’ve moved – do I need to tell someone my new address?
Yes. Please contact us and we will send you the appropriate form to complete. You can then return it to us; we will send it to the life insurance company, and then confirm with them that they received the form and made the change to their system.
How is Kelly Ramsdale & Associates compensated for its services?
We are paid directly by the life insurance company where the annuity is placed. Life insurance companies pay a 4% commission based on the amount that is put into the structured settlement. Normally, we are paid a portion of that commission percentage, usually 2%, while the remaining 2% goes to defense’s structured settlement broker. Ours is a one-time commission payment. Also, we will never bill you for our time when we help you with servicing your annuity in the future.
I have a lifetime payment, but it looks like it will end at a certain time – I’m confused?
Most lifetime payments have a CERTAIN guarantee period included. So, for example, if you are receiving $1000 per month for life with a 20 year guarantee, that means that NO MATTER WHAT, you will receive 20 years of payments. At the end of that 20 year guarantee period, the $1000 per month will continue to be paid to you as long as you are alive. Also, if you die before the 20 year guarantee period is finished, the remaining years of guaranteed payments will be paid to your beneficiary.
How safe is my structured settlement?
Structured settlements are one of the most secure financial vehicles available. Insurance laws require each life insurance company to set reserves for every single policy they issue. The life insurance companies must also maintain a surplus of additional capital above and beyond the reserves required to meet their obligations. The life insurance industry is heavily regulated and overseen by each state’s Insurance Commissioner, ensuring the safety of each annuitant’s policy.
Also, many judges like the security provided by structured settlements and insist that they be used in cases involving minor children or incapacitated plaintiffs. In most cases involving the U.S. government, structured settlements are required for children or incapacitated people.
Structured Settlement Security
Can’t I just take my cash at settlement and go buy my own annuity?
Structured settlement annuities are not the same as standard retirement annuities. If you take your cash from your personal injury or wrongful death settlement and, in turn, go out and buy a standard annuity, then all gains will be taxable as income. Not only that, the rates for structured settlement annuities are consistently better than standard annuities; meaning you get more for your money with a structured settlement annuity.
Structured settlement annuities may be set up in so many creative ways, using so many different benefit streams, that they can really be personalized for your life. Standard annuities do not have such flexibility in creating payment plans, they are usually simply lifetime plans (starting right away or deferred) paying for a lifetime or for a certain period.
Are the rates of return for structured settlements competitive?
Rates of return for structured settlements vary according to the way they are set up. If there are payments starting immediately and paying for a short time, the rates of return are lower than the plans that are deferred and paying over a long period. Many people find the rates are surprisingly competitive. Coupled with the tax savings, structured settlements can be very appealing.
What if I want to change my structured settlement after it’s set up?
Because of the nature of structured settlements, the IRS allows them to be tax-free because the annuitant does not have direct control over the funds. With control comes taxation on the gains. So once a structure is put in place, changes are not possible. This is why Kelly Ramsdale and Associates spends the time to make sure that each client’s structure is set up to fit their specific financial needs.
What if I want to "cash-in" my structure?
Thanks to the Structured Settlement Protection Act of 2002 (SSPA), and in accordance with IRC Section 5891, it is possible to “cash in” part or all of your structured settlement. The SSPA actually limited the amount companies that offer cash to you from your structured settlement can charge. These “factoring” companies charge various rates. IRC Section 5891 states that if changing the terms of your structure is “in your best interest,” you must take it to a judge in your jurisdiction for approval. This legal step protects those who are vulnerable or who frivolously want to trade their future income security for cash. If you have a reason that is “in your best interest” you are allowed to “cash in” your structure if a judge agrees.