IMPORTANCE OF STRUCTURED SETTLEMENT IN SETTLEMENTPLANNING

Kudos to the NSSTA member Tacker leCarpentie for the perceptive article in the report in North Carolina Lawyers weekly in cases which involve severely disabled incompetents and minors. As noted by LeCarpentier, the survivors of accident are now living longer, which increases the chances of outliving financial resources received following an accident.

Carpentier writes, “This is the main reason why the flexible, guaranteed and non-taxable payment arrangement offered by traditional structured settlement usually forms the spinal cord of any sound and diversified settlement plan, he writes.

On contrast, the use of the traditional bank trust – a part of managed investments which some offer as the alternative for the structured settlement fail to offer such advantages. The managed investment trust cannot and do not guarantee performance of assets under management.

Three risks are described by Le Carpentier, wherein the claimant not only relies on the investment trust or other investment products. Initially, there is the risk of mortality. Money won’t outlive the claimant. Second thing – there is a risk of lost capital. Volatile and unpredictable markets besides losses in trust produce cut into the settlement funds corps. Investment risks form the third part. The main thing in question is as to whether the return on future investments yields the same results as those obtained, especially when the prices of the U.S Treasury are at its all time highs.

His February 16 article is currently available at North Carolina lawyer weekly website, which one can easily access online. Structured settlements offer financial security to the victims and families of physical injuries. With the help of tailored stream of the payments, structured settlement offers tax-free income for a lifetime on a long term basis. The NSSTA or National Structured Settlements Trade Association represents an excess of 600 licensed insurance companies, insurance brokers, besides other primarily involved in the administration of the structured settlements.

Typical structured settlements are structured as mentioned. Injured party (or claimant) settle tort suit with defendant (or the insurance carrier) pursuant to the settlement agreement which provides that, in exchange of the claimant securing the lawsuit’s dismissal, the defendant or the insurer agree to make the periodic payments over a particular period of time. Thus, a casualty/property insurance company finds itself with a long-term payment obligation towards the claimant. In order to fund such an obligation, the casualty insurer/ property insurer takes one amongst two typical approaches. Either it purchases annuity from the insurance firm (called buy and hold case) or it delegates and assigns the periodic payment obligations to the third party member which then purchases the annuity. This case is known as the assigned case.

For more structured settlement information, please visit www.prospertypartners.com

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