SCOTT HOOVER, Settlement Consultant • SHoover@ringlerassociates.com
JEFF KLUGERMAN, Settlement Consultant • JKlugerman@ringlerassociates.com
WILLIAM MATHEWS, Settlement Consultant • WMathews@ringlerassociates.com
Over the past two years, interest rates have improved dramatically. This is great news as it relates to settlement options because the one thing that people are often most concerned about is how their money will grow over time. While we know this concern is often front-of-mind, the reality is that it’s actually not why many claimants choose a structured settlement.
The Structured Settlement Option
Many of your cases involve claimants that have injuries that make them unable to work, are minors, or are financial investment novices that need guaranteed income. For these people, structured settlements are a good option regardless of the interest rate environment. However, with today’s interest rate climate, many lifetime annuity policies are yielding as high as 5%, short-term rates tend to be as good as long-term rates, and structured settlements are tax-exempt. So, structured settlements which are always a safe option, are now even better!
A closer look into what motivates the people behind these injury cases is always beneficial to the settlement outcome.
Disabled claimants do not have the ability to work and earn an income. The need for a guaranteed income to cover bills and medical expenses most likely is their primary concern. Periodic payments whether monthly, quarterly or annually are designed specifically for the claimant to provide a fixed income to cover their required expenses. Your clients can have peace of mind knowing that they will have guaranteed income while other financial vehicles in most cases cannot guarantee the same security.
Just think, if you are retired and not working wouldn’t you require a certain amount of fixed income to cover certain expenses? I am sure you would. Well, in a sense, your clients are retired, but not by choice. What would happen if for a month or consecutive months there was not enough income or money to provide for the basic living expenses? Structured settlements, unlike most other investment vehicles, will provide the steady income.
In cases that involve minors, the money is typically limited to being placed into a bank account or structured settlement. The money markets or CD’s will yield taxable interest and in most cases earn less interest than what an income tax-free structured settlement can return. Parents and guardians have additional concerns that at the age of majority the minor can walk into the bank and withdraw the entire amount and spend it on a single day or on a single purchase. Assuming there is not any immediate need for upfront cash, a structured settlement can be the spend-thrift protection needed to limit the spending concerns. Regardless of the interest rate, the minor’s protection from themselves may be more important to a parent/guardian. Periodic payments, when properly designed, will provide the money over a period of time for the minor’s future.
Claimants Are Not Typically Sophisticated Investors
Many of your clients will have never seen a greater single lump sum of money during their life then the amount they are about to receive from their settlement. Many may never have had a sum of money to invest or have limited experience with certain investments. So how are they going to know where to put their money and at what risk? These claimants may not have the experience or understanding for certain investment vehicles. Claimants think they want to be aggressive and earn the most interest on their money only to take risks without the understanding that they may also lose some or all of their money.
Mismanagement of settlement proceeds is a common concern for many claimants and sifting through the various options can be a daunting task. A structured settlement can be one option to safeguard a claimant against dissipation of their money, lessen the investment risk that may be too aggressive or relieve the worry that goes along with managing large amount of money. A structured settlement should be considered so the claimant can be assured their money, plus interest, will be there for them when needed.
With today’s interest rates being markedly higher than in the past few years, structured settlements are an even better option. A structured settlement has always provided peace-of-mind and financial stability, but now they can be looked at for growing their settlement dollars into the future as well.
ABOUT THE AUTHORS. Scott Hoover, Jeff Klugerman and William Mathews are settlement consultants with Ringler. Their united mission is to provide objective settlement solutions that create future financial stability and peace of mind for all parties involved in a case. For more information about Ringler or to learn more about your Florida Ringler Consultants, visit www.ringlerassociates.com