Whether you received a structured settlements annuity as the result of winning a lawsuit or you inherited the remainder of a settlement from a relative, let us answer your basic questions here.
Understanding Your Structured Settlements Annuity
In 1982 the United States Congress passed a bipartisan law (a law supported by both Democrats and Republicans) that encouraged judges to award personal injury money in the form of payments. This means that rather than receiving one lump sum of money when a person won a lawsuit, they would receive payments over time. These payments are guaranteed by having the defendant who owes the money purchase an annuity. These annuities, which are sold by insurance companies, pay a set amount of money every month, quarter (four months) or year. In this way the person who is getting money is guaranteed a steady stream of income to cover medical or living expenses.
Inheriting a Structured Settlements Annuity
If you find yourself the owner of a structured settlement because someone you cared for passed away and left it to you, then you probably have a lot of questions. Let's answer a few of them with some general information. First, structured settlements are usually not subject to federal or state income tax. In addition, inheritances are usually not subject to federal or state income taxes. There is such a thing as a gift tax. But a gift tax is paid by the person who gives their money away. Meaning, if your Grandmother gives you money she pays any taxes, not you, and she only pays in certain situations. So, most likely, if you inherited a structured settlements annuity you will probably not have to pay state or federal tax. However, everyone's situation is different; you should consult an accountant for information on your state and your personal tax situation.
If you have inherited a structured settlement you have two options. The first option is to keep the settlement as it is. You can keep receiving the regular payments per the original payment terms. Your second option is to sell the settlement to a company like Direct Settlement. With this option you will get a lump sum of money and no longer have to deal with the structured settlement annuity at all.
Leaving a Structured Settlement Annuity as Your Legacy
Another way that you may wonder about inheritance rights is if you currently receive a structured settlement and wonder what will happen to it if you were to die. This is a simple issue that you do not need to worry much about. Just be sure to keep your structured settlements company updated with your latest desired beneficiary. Then, the beneficiary will automatically receive your payments if you die. Just be sure to update your beneficiary if you have a change in your life situation such as marriage, divorce or having children.
Your beneficiary will immediately and easily inherit your annuity payments. It is important that you realize that if you do not name a beneficiary for your annuity payments then your heirs will have to go through probate court to get access to your structured settlement annuity payments. This will cost them thousands of dollars and a lot of time. It is important that you always keep your beneficiary information up to date.
If you have any questions about selling a structured settlements annuity that you inherited, contact us at Direct Settlement for a no obligation quote. We are happy to answer any questions that we can.
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