An Annuity Is A Series Of Equal Cash Flows Understanding the Role of Structured Settlement Brokers

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Understanding the Role of Structured Settlement Brokers

Structured settlement brokers advise lawyers on the different types of annuity plans available to their clients or help arrange the sale of future annuity payments. This type of settlement is used to provide long-term compensation to individuals who have been injured due to another person’s negligence, such as in automobile accidents, workplace injuries, and medical malpractice.

Structured settlement brokers can play an important role in negotiating offers. Brokers not only compare the best deals, but they also provide lawyers and their clients with invaluable advice in deciding whether this type of financial arrangement is the best option.

While injury compensation is the most prevalent use of structured settlements, annuities are also used to win the jackpot lottery. Brokers can help lottery winners weigh the pros and cons of accepting payouts over 20 years versus a lump sum.

One of the characteristics of structured settlements is that they can be developed to meet the future financial needs of claimants. The financial amount is based on various factors including the current and future financial situation of the claimant along with the life expectancy.

When brokers develop financial proposals, they first evaluate applicant information: credit score, employment history, and health status. Life care plans are analyzed to ensure that claimants are adequately compensated for future living expenses and medical care.

Factors that determine life expectancy include: smoking; alcohol consumption; and a history of cancer, heart disease, diabetes, obesity, and other health problems. One of the primary goals of brokers is to determine whether claimants deserve a lower quality rating.

Annuity payments are guaranteed by life insurance companies. Premiums are based on risk level ratings which include: preferred, standard and substandard. Poor quality applicants are often rejected for life insurance policies. However, with an annuity with a poor credit rating, it can sometimes provide better returns.

Annuity payments provided as compensation for an injury are tax-deductible, while annuities for lottery winnings may be subject to federal and state taxation. Life insurance companies engage in investment schemes to provide higher rates of return to claimants. Investment earnings are subject to taxation for both injury and lottery settlement. Future annuities are subject to estate tax if they are payable to an estate.

Annuity payments can be structured to suit the claimant’s needs and can be paid monthly, semi-annually, annually. The installments may be equal or different. For example, if claimants require customized medical equipment that must be replaced annually, a structured settlement may provide additional funds each year to cover the cost.

It is important to ensure that the structured settlements are exactly as they are before signing the contract. Once established, structured settlements cannot be changed without court authorization. However, some states allow claimants to sell future annuities for a cash lump sum.

When selling annuity payments it is important to work with a broker who does not have an exclusive contract with the buyer. A reputable broker works with multiple buyers to get the best deal for the seller, not for themselves.

Working with a structured settlement broker registered with the Department of Justice is recommended. Brokers should also be insured against errors and omissions. It can be worth doing research to make sure brokers have a good reputation and can be trusted with sensitive information.

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