How do structured annuities work?

A structured annuity provides exposure to stock markets, giving you the growth potential you need to achieve your goals. For each indexed account you select, the performance of an underlying index will determine how much you can earn (either up to a limit or subject to a commission). To make these periodic payments, the defendant usually buys an annuity from an insurance company. That way, the defendant can remove his obligation from his books and transfer responsibility for the payment to a company with experience in handling periodic payments.

With a RiverSource Structured Solutions annuity, you can allocate your money between a variety of indexed accounts. Before selling a structured settlement, policyholders must weigh the financial losses they might incur against their need for immediate payment. The biggest advantages of structured agreements are predictable and secure income for the homeowner and the fact that the total amount of money you receive will be more than what you would get from a one-time lump sum payment. The RiverSource Structured Solutionsâ„  annuity is designed with these advantages and offers you a balanced solution to help you meet your financial goals.

Because annuities can be designed to offer timed payments, guarantees on capital and investment gains, and were already offered by insurance companies, they quickly became the vehicle of choice for implementing structured settlements. Choosing between a one-time payment and a structured settlement can have long-term tax and personal consequences. The defendant or insurer then pays the settlement funds to a third party assignment company, which assumes responsibility and purchases an annuity from a structured settlement insurance company. But the reality is that with investment in structured settlement annuities, higher returns can legitimately be lower risk; the attractive return compared to other low-risk fixed income investments is not due to higher risk, but rather to very poor liquidity.

Which means that ultimately, the company needs to find both a continuous flow of people who have structured settlement annuities to sell (not surprisingly, that is easier to find in these difficult economic times) and investors who are willing to buy the payment flow of seller's only annuities. However, in many cases, the structured settlement recipient actually needs liquidity for some reason and can't wait long. A structured settlement most commonly arises when a plaintiff wins a lawsuit, for example, due to injury as a result of medical malpractice, and payment for damages is awarded as a series of payments over a period of time. Regardless of whether you choose a one-time payment or a structured settlement, it's worth consulting with a tax professional, accountant, or financial planner to determine how the structure of your award or settlement will help you maximize your outcome based on your personal circumstances and to achieve your goals.

financial. On the other hand, part of the reason for the high returns on investment in structured settlement annuities is because there are so few investors involved that the market is very liquid and inefficient; in theory, if there were several companies competing for payments from a structured settlement receiver, there would be more competition, which would result in a higher price that would deliver more money to the seller and provide a lower (more competitive?) returns for the investor. To encourage its use, the new law made any interest or capital gain earned on the annuity within a structured settlement tax-free. .

Minnie Wuestenberg
Minnie Wuestenberg

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