Tax Advantage of Structured Settlement Payment

Structured Settlement = No IRS

Normally when a person wins a case and is handed a monetary reward. the claimant will receive such monetary compensation in the form of structured payments. Structured payments which means monthly slices  of a large sum of money.Structured setlement payments exists to alleviate the burden of finding such hefty payments to be made at one time.

As a substitute to a single lump sum payment, the claimant will be compensated a monthly structured settlement payment for an agreed period of time Choosing such structured settlement payment series over the lump sum amount means a guaranteed source of long-term income for even a whole lifetime.

One of the highlighted benefits of these regular payments is the excellent tax advantages that come with it. It is basically income exempted from taxes unlike the usual salary or other forms of income like royalty or dividends. For the record, there is no income tax on structured settlement payments since 1982. The tax savings itself makes this option of maintaining the long-term monthly payments very attractive. Over the entire period of the settlement, such savings is a big amount in itself.

A decade ago, there are problems with issues on the burden of taxation over transactions of transferring or selling of structured settlements. Insurance companies asserted that their clients or even their companies are at the losing end with the dealings in structured settlement selling.
When an individual sells the structured settlement payments, the annuity obligors suffer tax consequences. This became the source of several litigation in the past between insurance companies and settlement purchasers and annuitants.

With the enactment of the Structured Settlement Protection Act, it will further benefit these individuals receiving the monthly regular payments. Such regulation also clearly mandated that annuity providers will also not suffer from further tax consequences as a result. The law clearly states that annuity owners and providers do not owe any taxes as a result of these transactions.

Selling your structured settlement payments will make you lose many tax benefits in the process. Selling this guaranteed income has only an advantage of large yet single payment. Before deciding, it is best to consult with your financial adviser regarding selling your structured settlement payments. Your adviser will definitely help in defining with what you will lose in the process, especially the tax savings you will forego.

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