Settlement Planning Theory: Adding a Market-Based Component to Structured Settlement Annuities
Customizing Structured Settlement Annuities for Future Medical Care and Income Replacement: Balancing Security and Growth with a Market-Based Structured Settlement
When parties are considering an injury settlement, one of the most critical aspects, especially in catastrophic cases and wrongful death settlements, is whether the settlement amount is economically sufficient. In other words, will the settlement be enough to take care of the injured person or their family?
When dealing with an injury that requires future medical care or income replacement, a structured settlement annuity can be customized to provide for these needs on a guaranteed tax-free basis. It can pay for a specific period or for life and can be combined with a market-based structured settlement on an integrated basis to address the injured person's needs to include a balance of security and growth.
Enhancing Settlements with a Market-Based Element
While structured settlement annuities offer low-risk payments that will never be eroded by increasing taxes, there is a need, particularly with medical and general inflation, to add a market-based element to provide enhanced potential for growth.
Investing in Growth with Tax Efficiency
Structured settlement annuities are essentially protected from loss but layering them with a market-based structured settlement adds more growth potential in a tax efficient manner, rather than using the cash portion to invest in market-based securities post-settlement.
Determining the optimal asset allocation to meet the injured person's needs, with the fixed income through the tax-free structured settlement annuity component and the growth component held in a market-based structured settlement, puts the injured person's needs and economic sufficiency at the forefront of the settlement in a much more holistic way. After all, the best settlement is the one that meets all of an injured person's needs today and tomorrow.