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FEATURES & BENEFITS
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COMMENTARY
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| Payments are tax-free. | Structured annuities were created with the input and approval of Canada Customs and Revenue Agency (“CCRA”, formerly Revenue Canada). All payments to the plaintiff are tax-free. There is no need to declare the income from a structure on personal tax returns. |
| A guarantee clause can ensure that payments continue after the death of the plaintiff. | A plaintiff’s estate can continue to receive payments after the plaintiff’s death. The structured annuity can provide payments for the life of the plaintiff, guaranteed for a suitable period of time to provide for dependents. |
| The funds are untouchable.A structure is non-assignable, non-commutable, and non-transferable. | Payments cannot be interrupted for any reason. Creditors cannot seize the structured annuity. The plaintiff cannot assign, pledge or transfer his or her interest to anyone, and cannot “cash in” (commute) the payment stream. This ensures the income stream will always be there. |
| Two insurance companies guarantee all payments. | CCRA requires payments to be fully guaranteed by a federally regulated life insurance company and by the casualty insurance company (the defendant’s insurer). This provides maximum security for the structure fund and payment stream. |
| A payment schedule is tailored to meet the specific needs of the plaintiff. Payments can be made monthly, or as periodic lump sums. | A plaintiff can receive monthly payments to support a certain lifestyle, or can schedule lump-sum (balloon) payments at periodic intervals to replace equipment, pay tuition, or modify a house etc. Or choose a combination of monthly and lump sum payments. Finkelstein Structured Settlements, Inc. can illustrate schedules using exclusive computer software to help plan the right structure. |
| Payments can be postponed to some time in the future. | If the money isn’t needed immediately the payments can begin at a future date. In one of our cases a dentist who suffered a diminished earning capacity has deferred commencement of his payments until his planned retirement in fifteen years. Deferring payments allows his fund to grow untouched thereby affording him higher future monthly payments. |
| The payment schedule can consider the needs of caregivers. | For example, annual lump-sum payments can be scheduled so the plaintiffs caregivers can have a vacation. |
| The schedule of payments is fixed. | Once the structured settlement annuity contract is in place the payment schedule is permanently fixed and cannot be changed. This fixed-scheduled approach protects against depletion of funds by poor investment decisions, impulse spending, or negative influence from friends and relatives. The plaintiff can carefully develop a plan for the future with professional help. |
| Where a plaintiff’s life expectancy is lower than normal, the purchase price of a structured annuity will also be lower; and, conversely, benefits will be higher for a given level of investment (i.e., purchase price). | Structured annuities are often guaranteed for life. Where the expected lifespan of a plaintiff has been reduced, a life insurance company will expect to pay out less money over time and will adjust the purchase price of the annuity accordingly. Or, periodic payments may be higher for a given level of investment. |
| Payments can be indexed. | Indexation of monthly payments preserves the buying power of benefits and guards against rising inflation. Indexation can be accomplished by flat indexing (e.g., 2% per year) or by CPI-indexing where increases in monthly benefits are linked to the Consumer Price Index (CPI). Stable interest rates and low annual rates of inflation allow insurance companies to keep down the cost of each structure – a direct benefit to the plaintiff. |
| Money is managed without expense to the plaintiff. | No investment advisors are needed to manage the funds. This reduces the amount payable by the defendant’s casualty insurance company since it does not have to include investment management fees in the award. This cost-saving will have a positive effect on the settlement negotiations as the casualty company reduces it’s liability. |
| Payments are guaranteed for life regardless of how long the plaintiff lives. | In non-structured cases the future income award is calculated as the present value of the expected future income stream, which is based on the expected lifespan of the plaintiff. In non-structured cases a plaintiff who lives longer than expected could run out of money. But with a structured settlement, income benefits can be paid for life regardless of how long the plaintiff lives.With structured settlements the life insurance company assumes the risk of how long the plaintiff will live. Working from actuarial life tables and from the plaintiff’s medical records the life insurance company assesses the plaintiff’s life expectancy. A shorter life expectancy means larger monthly benefits because the insurer expects to pay less over time for a given annuity investment or purchase price. Even when a plaintiff lives longer than expected the life insurance company will continue paying benefits for the rest of the plaintiff’s life (assuming the structure is set up in this way). |
| A reversionary clause can be built into the contract. | A reversionary clause may be appropriate if the plaintiff has no dependents to support. If the plaintiff dies before the end of a guarantee period, the remaining annuity payments revert (are returned) to the casualty insurer. Sometimes the casualty insurer insists on a reversionary clause as a condition of agreeing to the structure — especially where monthly benefits are used to pay expenses associated with the plaintiff’s day-to-day care (e.g., 24-hour nursing). |
| The purchase price of a structured annuity is lower than the lump-sum investment required to produce the same “net” income stream. Tax-free payments mean the casualty company does not have to include a tax gross-up in the award. | This is one of the “win-win” features of a structure, which the defendant’s casualty insurer appreciates. Because the tax department allows structured income to remain tax-free the casualty insurer saves money; it doesn’t pay as large a lump sum to produce a similar after-tax income stream.This cost saving can have a positive effect on settlement negotiations. |
| Our service to you is FREE. Our compensation is paid entirely by the life insurance company that underwrites the structured annuity. | This gives you good reason to consult with us at an early stage in your clients file. |
| Caregivers can benefit too. | For example, annual lump-sum payments can be scheduled so the plaintiff’s caregivers can have a vacation. |
