Annuity Settlement Options: One of the unique features of an annuity is the opportunity to choose a settlement option and establish a reliable income stream. If a settlement option is chosen, Gleaner will make periodic payments to the annuity beneficiary. Annuity payment options depend on the type of annuity purchased. Immediate annuities can be paid within the year of purchase.
Deferred annuities take years to pay, as tax-free annuity grows with interest. Payment schedules determine the length of income stream and survivor benefits. It would be best if you thought in terms of winning a personal injury lawsuit due to a car accident. First, an annuity agreement is negotiated between the plaintiff and the defendant.
The settlement is then spread out into a series of periodic payments over an agreed period of time rather than a one-time payment in most cases. With the annuity settlement option, you have full control over specific annuity terms. You can select an annuity that makes payments to its beneficiaries for the rest of their lives or for a specific period of time after their death. Life annuity is a general payment category in which payment is guaranteed for life.
Sometimes known as a direct life annuity, the life annuity pays a benefit for as long as the beneficiary lives, and then ends. Whether the beneficiary lives more than 100 years or dies one month after the annuity period begins, annuity payments will continue only until they die. In other words, there is no guarantee as to the minimum amount of benefits under a life annuity. Regardless of when you begin to receive payments for these products, immediate annuities are designed to create a revenue stream for a set period of time.
The chart below looks at some of the comparisons between an annuity settlement option and a trust, and indicates where the fit might be best. The annuity settlement option may also be effective for minor children or beneficiaries with an impairment in mental functions. Basically, you sell your settlement payments at a deep discount through a settlement transfer in exchange for a lump sum of cash. The annuity settlement option provides a simple and free method to gradually transfer estate to beneficiaries through pre-scheduled income payments after death.
If you decide to change the beneficiaries or the terms of the annuity, a new annuity settlement option form can be completed at no cost. The annuity settlement option allows you to differentiate between beneficiaries, allowing some to receive a lump sum and others to receive an annuity based on the terms you select. If the state uses the equitable distribution method and the agreement was obtained before marriage, the agreement is likely to stay with the owner of the agreement. Once your contract is annualized, part of each payment (of a fixed annuity) is considered a partial refund of the base (your original contribution) and part is considered taxable income through an exclusion index.
Joint and survivor annuities ensure that payments will be made for the rest of the life of both the beneficiary and another person, usually a spouse. The structured annuity emerged in 1983 after the Periodic Payments Settlement Act of 1982 was established. After the settlement money is negotiated and final terms are reached, the court order will request that the funds be placed in a type of income annuity contract called structured annuities. The Federal Periodic Payment Settlement Act of 1982 made court approval mandatory for all sales of structured settlements to ensure that the best interest of the consumer comes first and limit any party taking advantage of the receiver of the settlement.
Secondary market annuities occur when a third-party company gives the agreement owner a lump sum of money for payment of the structured settlement. .