Structured Settlements FAQ

How safe are structured settlements?
Structured settlement payments are funded by either a life insurance company annuity or a US Treasury bond – two of the safest funding sources available. Structured settlements are funded through multi-billion dollar life insurance companies with strong financial ratings from AM Best, Fitch, Standard & Poors, Moody’s and Weiss.

Could future events change my payments?
Structured settlements funded with fixed annuity contracts or US Treasuries grow at a guaranteed fixed rate of return unaffected by the volatility of the market. The rate of return exceeds other fixed income investments. Coupled with tax-free status, structured settlements often outperform investment options offered within the equity market.

How much will this tax break be worth to me if I opt for a structured settlement?
Under current law, structured settlement payments are completely free from federal and state income taxes. As a general rule of thumb, you could save between 25% and 35% in state and federal taxes, depending on your tax bracket. Overtime, the savings are significant when compared to a taxable investment.  Structured payments received by your estate or by your heirs are also received tax free. Please consult your tax advisor to figure out your exact savings.

Can I have my future payments structured anyway I like?
Our goal is to provide you with the best possible solutions tailored to personal and family needs. We will provide several structure options for your initial consideration and work together to make the most of your settlement funds, customized to your unique specifications.

What is the most common type of payment streams in structured settlements?
Our clients generally choose a life annuity with a period certain guarantee period since it provides an income stream that can’t be outlived. For example, $2,000 per month for life with a 20 year guarantee means that payments will be made for a minimum of 20 years and then for the life of the annuitant thereafter. If the annuitant dies before the period certain expires, the beneficiary receives the remaining guaranteed payments tax-free.

Why is a life annuity the most popular type of structured settlement option?
Life annuities provide lifetime financial security and transfer the risk of living a long time to the insurance company. The hardest part of any financial plan is not having the foresight to know how long an annuitant will live.  For example, consider a 45 year old male wanting to invest $250,000 into a period certain annuity.  If he received $20,000 a year, his money would be depleted in 18 years. With a life annuity, he could receive $16,000 a year, for the rest of his life, for the same $250,000 cost.

To provide some protection, you can include a reasonable guarantee period in your structure at a relatively small cost. It’s good to know that your family will have a tax-free guaranteed income if you die pre-maturely.

I hear that lump sums paid every few years with life annuities are also popular. Why?
Clients often like to divide their money into two parts. For example, you may choose a life annuity that pays $2,500 per month plus a $50,000 lump sum every five years. The monthly payment can be used for general living expenses. The lump sums can then be used for planned events such as vacations, a down payment on a second home, educational expenses or investments. 

What about inflation?
You can have your payments increase to keep up with inflation and protect against rising costs. For example, a 3% increase in payments each year helps protect your spending power for as long as your structured settlement is in effect.

What is a “Rated Age”?
One of the exclusive features of a lifetime structure is its ability to provide more income over your lifetime, if there are indications of reduced life expectancy. This involves the use of a “rated age” obtained from life insurers, based on existing medical reports. A rated age means that the insurer is willing to treat you as being older than you actually are, when providing a quotation for a lifetime structure. This produces more income. Receiving a rated age does not mean you will die early. It means only that the life insurer is willing to treat you more favorably for lifetime quotations. When you “outlive” expert predictions, your structure continues to provide guaranteed tax-free income. No other investment allows you to earn more income because of your medical condition.

Pressman Settlements – No fees – ever!
You will never pay investment management expenses when you consult with us or have us implement your structure. Our income is derived directly from the life insurer when the structure is purchased. As a result, the income you see on your final proposal is the income you will get – it’s guaranteed.