By David Peel
When most folks hear of “structured settlements” it is during obnoxious commercials trumpeting the right of injured litigants to get “their cash now” and not wait. As injury attorney, I deal with these settlements regularly. We sometimes use structures to help our clients pay no taxes on the settlements and their interest earnings. First off, understand that personal injury compensation is tax-free. Why? It is not income or gain; it is “compensation for a loss.” But, if you invest the money, the interest earned or investment return on your money is “gain or income,” and thus is fully taxable. Taxes are going up every year. Structured settlements are a flexible and fully customizable way to avoid tax while making sure the money comes out exactly as you like. You can pick your own goals. Some clients like lump sums every five years (ages 30, 35, 40, etc.) while others are funding their retirement. With minors (under 18) it is very helpful to structure beyond the 18th birthday to avoid their age-induced stupidity. They will buy jet skis and stuff and have nothing in a year. They do much better at 28 than 18. (Didn’t you?). If carefully managed, the money can fund anything from medicals bills to college; a home to retirement. Examples include: $25,000 to an injured youth, will pay about $8,700 per year during college, for a tax free gain of almost $10,000, all guaranteed. $500,000 for a 21-year-old male, will provide $1,852 per month for life! If the claimant lives to life expectancy, the total payout would be $1,298,133! (If the injured party dies, his next of kin receives a total guaranteed payout of $666,659). With taxes soaring and interest rates creeping up, structured injury settlements are great options to consider if you, or a loved one, may receive an injury settlement.
Peel seeks justice for those injured in car accidents, work place incidents, medical malpractice, and nursing homes. He often addresses churches, clubs and groups without charge. Peel may be reached through PeelLawFirm.com wherein other articles may be accessed
