Since the 1980s, structured settlements have been a go-to for plaintiffs who receive a settlement or jury award from a personal injury or workers compensation claim. That’s because the benefits of a structured settlement for the plaintiff are many, namely custom-tailored planning, guaranteed future payments that extend the settlement monies over time, and the tax benefits of spreading out that income, which all help set the stage for future financial stability.
The security and tax implications of structuring are extremely valuable to many plaintiffs who receive a settlement. Investment-backed structures are a strong solution for some plaintiffs’ who are to receive periodic payments, as they are a tax-free settlement design that can offer substantive expected growth based on market activity.
An investment-backed structure offers a higher yield on settlement payments over time, without the tax burden that typically comes with an investment portfolio. By utilizing an investment-backed structure composed of a diverse investment plan, clients can grow their funds for years (or even decades), reaping the benefit of not only their settlement, but also the tax-free growth of their settlement.
Milestone offers tax-free settlement designs through professionally managed with diversified portfolios, giving clients the ability to earn on their settlement dollars, tax-free. These plans incorporate a combination of:
- Fixed income
- U.S. Treasuries
- Investment-grade corporate bonds
- Dividend stocks
- Private equity
- S&P 500
- Russell 2000 Index
- Fixed-index, traditional, or secondary market annuities
Based on typical market performance, average market activity over the course of ten years indicates seven to nine percent growth, but no future returns are ever guaranteed.
Correctly mapping out a settlement helps ensure that the recovery a plaintiff receives is as beneficial as possible. This takes into account consideration of future necessities such as medical bills, equipment, long-term care, and other expenses related to the plaintiff’s injury. Milestone’s tax-free settlement designs provide financial security and long-term income in predetermined increments. These payments are 100% exempt from federal and state income tax, and so is the growth on the account. Other key features include liquidity from a fixed payment schedule and a one-time no-fee hardship provision, security, customization, and confidentiality. This modern settlement design is a no-brainer, especially for younger plaintiffs.
Market-Based Options for Attorney Wealth Management
Attorneys can also benefit from market-based investments for their own financial planning. Like structured settlements, attorney fee deferral has been around since the 1980s. Under Richard A. Childs, Et al. v. Commissioner of Internal Revenue, attorneys who elect to structure contingency-based fees do not have to pay taxes on those payments until the year the income is received. So, fee deferral allows for the spreading of income, thus preventing a large tax burden in one year.
Similar to plaintiffs, attorneys can use the open architecture of an investment-backed deferral plan to invest their fees in any listed security or investment, or a combination of many. They can choose their level of risk and reward, and they can involve their own financial advisor in the process. Milestone’s tax-free settlement design also offers a one-time no-fee hardship provision.
Traditional fixed-annuity-based structured settlements are still a viable option for plaintiffs and attorneys. When the time and place are right, investment-backed structures could act as a supplement, resulting in greater growth when discretionary dollars from the settlement are available.
The structured settlement industry continues to evolve, and with it, so does wise investment advice and settlement planning strategies. Each case is unique, and an investment-backed solution is not always appropriate for every claimant. A comprehensive settlement plan, when used in combination with a future payment plan, is often key in addressing future needs while providing market-based investment growth for discretionary settlement dollars. If you’d like to learn more, please give us a call today.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).