If you have a structured settlement, you’ve likely heard this term many times. The annuitant is the recipient of the ordered payments in the structured settlement. In other words, that’s you.
The term annuitant comes from the underlying investment that makes your structured settlement possible: an annuity.
If your structured settlement is the result of a personal injury lawsuit, the defendant likely found an insurance company and purchased that annuity. That allowed him to set aside an amount less than your total settlement inside an annuity contract that guaranteed a specific rate of return.
So, the defendant sets aside an amount of money less than the total court-ordered settlement; that’s good for him. He gives it to an insurance company who invests it in fixed-return investments in order to ensure that you will get the stream of payments promised to you as part of the settlement. The defendant doesn’t have to worry about managing the money set aside, and neither do you.
The annuity payments don’t just help the defendant, however – they also help you. By putting your settlement into a specified stream of payments, you are guaranteed cash flow to help you with your living expenses, medical bills, etc. This is particularly important if your injury has left you unable to work.
There is a tax benefit to a personal injury annuity – as long as the award relates to a personal injury, there is no tax on the payments. But just to be safe, before you sign any structured settlement, talk with a tax expert to get a solid understanding of how it will be treated on your tax return.
The annuity payments are virtually guaranteed. Yes, they are with an insurance company, and if that company goes belly-up, you might be left holding the bag. But most insurers set these funds aside in trust, so even if they bankrupt, you will still get your payment.
The number one benefit to being an annuitant is protection from yourself. Were you given thousands, or even millions of dollars, the temptation to spend it would be overwhelming. By putting that award in a structured settlement, you don’t have to worry about spending it or investing it badly. Someone else takes care of all that for you. So you can rest assured that the payment stream comes only to you.
Before you sell, take a hard look at your finances and make sure there is some other income that will make it possible for you to meet your expenses. Without the structured settlement, who will pay for you food? Rentals?
If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.
