by John Darer® CLU ChFC CSSC RSP
The are many advantages to structured settlements, but the one advantage that receives heavy emphasis is the tax benefit that structured settlements provide to physical injury victims, or to survivors of those who have died and recovered in a wrongful death law suit. There are also tax advantages to using structured settlements in employment cases, such as wrongful termination, discrimination or failure to promote lawsuits.
CNBC reported today that non-partisan group The Tax Foundation says that Americans Earning over $250K could pay 58% tax. Moreover, a visit to The Tax Foundation website reveals the following ominous looking headline:
"To Close Federal Deficit, Tax Rates Would have to More Than Double" (if Congress were to close the deficit in 2010
Use this following chart to help compare the income tax free (or tax deferred, in the case of most elements of damages in employment cases) Internal Rate of Return of a structured settlement to alternative investments with taxable returns at varying tax rates. For example please note that a 3.0 % tax free rate is like receiving 5.0% if you are in a 40% marginal tax bracket. On the other hand those who might be impressed with the 4% they are receiving on a taxable CD from their bank would only net out 2.4% after taxes.
Structured settlements are funded with United States Treasury obligations, such as Treasury Inflation Protection Securities, or with special customizable annuities from major life insurance companies.
For more information about structured settlements or for a comprehensive settlement planning discussion call John Darer® CLU ChFC CSSC RSP toll free at 888-325-8640