While the tax advantages that come with having a legal settlement paid out in installments rather than a lump sum may sound enticing, you should know the other advantages as well as the disadvantages that come with investing in structured settlements. Know what you’re truly investing your time and money in before you spend either.
The Ups
One advantage of structured settlements is they’re backed and secured by state lottery commissions and reputable life insurance companies, which lowers your overall risk without the need for you to sacrifice any of the investment’s risk. You’ll also be able to keep whichever rate you manage to lock in for your investment since structured settlement annuities are promised in a contract rather than established as projections.
Depending on your wealth strategies team, you may have access to specially-licensed brokers who thoroughly inspect your investments and assets to make sure both they and you are well taken care of for the long run. You’ll most likely be better off with a wealth strategies company that receives a majority of its business through repeat clients and referrals from existing clients.
Another great thing about structured settlement investments is that you can use them to supplement your other financial yields, such as your retirement income or personal holdings. You’ll also retain complete control over your invest during the entire process.
The Downs
Before you invest in a structured settlement, you’ll want to make sure it’s backed by an insurance company that has a good reputation and is financially stable in order that they can successfully pay all claims. You’ll also need to do your due diligence and make sure the terms of the court that accompany your transaction are both viable and legal.
Another disadvantage of structured settlement investments are they aren’t insured by a federal government agency, like the Federal Deposit Insurance Company. You should also be aware that your structured settlement’s insurance rates might be at risk. Even though the secondary market annuity may be locked in, there’s still a chance your interest rates may increase. One way to control this risk is to buy secondary market annuities over time and create an annuity ladder and a financial safety net. It’s also worth nothing that since structured settlements aren’t considered liquid purchases, you’ll most likely have to hold them to term.
Give considerable thought to any structured settlement you’re thinking of investing in. Look into the professional and industry background of any wealth strategies team you decide to let handle your settlement. To help ensure your investment has been properly inspected, your broker should rely on the help of legal counsel that’s impartial to the insurer as well as the seller.
