Non-Physical Injury Annuities
You’ve reached a settlement for a non-physical injury case. After allocating funds to pay attorney fees and costs, you have a portion remaining that you can take in cash. If you do so, you will pay income taxes based on IRS income tax rules. However, there is another option.
We know that your settlement will never be nearly enough to make up for your losses, so handing a big part over to the government in taxes can be especially difficult. “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.
TYPES OF CASES ELIGIBLE FOR NON-QUALIFIED STRUCTURED SETTLEMENT:
- Employment (exclusive of lost wages)
- False Arrest
- Civil Rights (if no physical injury occurred)
- Breach of Contract
- Sexual Harassment
- Punitive Damages
- Property Damages
- Environmental Claims
- Psychological / Emotional Distress (if no physical injury occurred)
- Coverage Buyouts
- Property Disputes
- E&O, D&O Claims
- Some Estate Distributions
- Whistleblower Settlements
WHEN SHOULD YOU CONSIDER A “NON-QUALIFIED” (TAX-DEFERRED) STRUCTURED SETTLEMENT IN A NON-PHYSICAL INJURY CASE?
- Income replacement is important.
- The plaintiff wants to defer income tax on all or a portion of the settlement.
- The plaintiff isn’t an experienced financial expert. Even if he or she is, a structure may still be a good option to consider.
- 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.
- 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
Choosing a structure for your non-physical injury situation provides you with several benefits:
- You will receive income tax-deferred payments for the life of your annuity and even for your lifetime based on your payout option.
- You will have peace of mind knowing that the benefits are paid by one of the largest life insurance companies in the United States that is highly regulated and that your payments are contractually guaranteed.
- Because your structured settlement is based on a fixed interest rate, it is not subject to the ups and downs of the financial markets. You know exactly how much you are going to receive and when those payments will arrive. No guesswork or stress.