Structured Settlement

Protecting Your Family’s Interests for over 10 Years

Personal injury or Disability victims in Canada who win or settle their cases can often choose to take their monies as a one-time lump sum or as a series of payments spread out over a period of time. These series of payments are commonly referred to as a structured settlement. Whether you should decide to take a lump sum payment or a structured settlement will depend on a number of factors including but not limited to:

  1. Tax Liability
  2. How you plan to spend the money
  3. Whether you require guidance in managing a significant amount of money.

According to Brittany Gillingham of McKellar Structured Settlements Inc “There’s an extraordinary level of certainty associated with structured settlements in the security of funds, … [t]he advantages of a structured settlement is certainty. Moreover, throughout the 40 plus year history in Canada, not a single penny of payment has failed to be made under the contract. It is tax-free money that is totally locked in and secured for the claimant.” There are also a number of features, safeguards and benefits that are significantly beneficial for people who are catastrophically injured. Stability is key.

Structured Settlement: Breaking it Down

A structured settlement can be very flexible in design. Payments can be designed to increase at specific points in time, such as when a medical emergency or need must be attended to or large medical payments or expected later in life. The payments can be indexed at a fixed interest rate or linked to the Consumer Price Index to offset inflation. They are flexible enough to include a series of lump sum payments. Just under half of all significant claims are resolved on the basis of at least part of the funds being allotted for settlement be paid with a series of tax-free payments over a fixed term of years or the lifetime of the claimant. In some cases, a guarantee can be purchased to continue the payment subsequent to death of the recipient and allocated to family members or loved one(s) as stipulated in the contract.

The types of structure are virtually unlimited in terms of its design. Prime examples include but are not limited to:

  • Substantial initial payment: This could be a situation wherein your injuries have rendered you unemployed for some time and expenses are mounting. Subsequently, you can cater a structure settlement to provide a large initial payment so that you can pay overdue bills, pay off a mortgage, or purchase needed items like a new car. The smaller subsequent payments could then act as substitute for lost income.
  • Significant Expenditures: In this situation some structure settlements are designed to provide a yearly income, with additional amounts set aside to pay for a significant expense such as university or college tuition.
  • Increasing your payments over time: Structured settlements can start relatively low and end high. Payments can be structured to increase over a period of time.
  • Payments decrease over time. Structured settlements can also start high and decrease over a period of time. This might be of benefit to persons who expect their income to increase in near future.
  • Delayed payments. In this scenario a plaintiff may choose to delay receiving their lump sum until they reach the age of the retirement.

Creation of Structure

In order to execute periodic payouts to victims, the defendant will purchase an annuity from an insurance company. This is done to alleviate their obligation to pay you from its book and transfer the responsibility for payment to third party company with expertise in managing periodic payments. It is important to note that the right to structure a settlement must be negotiated during the settlement process and must be part of the documented settlement agreement. Moreover, one cannot receive settlement funds first and then purchase a structured settlement annuity yourself after the fact. The annuity as mention above earlier must in fact be purchased by the defendant. Prior to a mediation or held settlement discussions, it is important that you make sure your lawyer is preserving the right to structure any part of the settlement.

Utilization of Settlement Funds: How am I going to spend this money?

Do you require the money for some specific purpose such as past due bills or imminent medical expense? Do you expect to use the settlement to replace future income? Do you want to give it away to a charity? Do you want to pass it down to a loved one after death?  Your goals for the money will play a significant role when designing a structure to your needs.

Do You Have the Skills to Manage a Large Lump Sum Settlement?

The majority of victims who have sustained an injury from an event lack the expertise to manage a significant lump sum settlement on their own, and alternatively, must hire a financial professional for advice on how to best manage and invest your asset.  Unless you have a qualified friend or relative willing to advise you for free or at reduced cost, you will likely utilize some of your settlement funds to secure this advice. It is important to note that when you choose a structured settlement one avoids the hassles of managing a large sum of money.

Do you have the Tendency to Blow your Money on Luxury items or Risk Investments? 

Sometimes have access to a large sum of money may be too enticing for some victims who have sustained an injury from an event who do not have the skills to manage a large award. Instead of saving their settlement funds to finance their future medical and personal needs, some people will spend it on questionable investments or purchase expensive luxuries. In which case if the above noted reflects this attitude, then a structured settlement may be right for you.

Are you Charitable to Friends and Family looking for a Gift?

Individuals who have received large lump sums in injury cases often report the relatives, friends, and even strangers will request assistance ranging from a loan, to pay their bill, or money for the next opportunity to invest and make a fortune. A structure settlement in this regard can often act as a shield or guard in these situations where intimidating pressure to give exists.

Retrieving the Right Advice for the Right Source

At Juzkiw Law, our team will have acquired a keen insight and will negotiate the terms of settlement on your behalf, regardless of whether you choose a lump sum payment or a structured settlement. Without specialized experience, a structure settlement may be improperly executed leaving the claimant with significant tax liability. Working in conjunction with structured settlement brokers, which are well known in the legal profession and insurance community, our team will secure proper compensation for your recovery.

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