Area of Law: Personal Injury
Answer # 487
Features of structured settlementsRegion: Ontario Answer # 487
Structured settlements cannot be changed by anyone after they are signed and the case is closed. You won’t be able to take advantage of opportunities for investments or unexpected purchases in the future by “cashing out” all or part of the structure.
While the structured settlement payment schedule can be shown to a lender as “proof of income” when applying for a loan, the payments themselves cannot be pledged, assigned, garnisheed or otherwise redirected to a lender.
Also, structured settlement interest rates are fixed at the time of purchase. Better rates of return might be available at some time in the future and the claimant will not be able to benefit. However, should interest rates fall, your investment is protected.
A very important issue is deciding what happens to structured settlement payments when the claimant or recipient dies. Most structured settlement annuities contain some period of guaranteed payments, such as 25 years for a life annuity, and many claimants incorrectly assume the guaranteed payments will automatically go to their family or beneficiaries if they die before the guaranteed period ends.
Often, however, guaranteed payments are set to “revert” to the defendant or insurance company that bought the annuity upon the claimant’s death. This can be avoided by negotiating the right to have guaranteed payments continue even after your death, usually in return for a relatively minor payment.
It is also important that claimants not name their estate as the beneficiary or recipient for guaranteed payments upon their death since the estate itself is subject to attack by creditors and inheritors, as well as probate and lawyer fees. Actual individuals should be named and, in creating the structured settlement, the recipient should retain the right to change the names of recipients for future guaranteed payments.
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