Court cases or death benefits that involve young people are often ordered by the judge to be accessible only through annuity payments. This method prevents the young person or their parent from spending the money too quickly, further improving the future financial stability of that person. Structured settlement payments are given over the course of time in the form of a monthly check. The young adult, teenager or child will receive these payments for their everyday living costs and expenditures. Experts recommend that the money given by these settlements be put into a fund to grow as opposed to given directly to the, often irresponsible, individual. There are a number of structured settlement annuity and loan companies out there that will be of much help in making this decision.
What Young Adults Can Do with Their Structured Settlements
Unlike an adult coming into a windfall of money from a settlement or death benefit, people under the age of 18 are unable to control any of this money. A judge will court order how the money is dispersed, which is often done advantageously to the child or teenager. Once the young person reaches the age of 18, they can control the payments being received and change how often and how much they get.
Structured settlements go a long way when invested or saved. As long as the minor does not need that money upfront, the cash flow should go into a savings account or investment plan that grows the money over time. Saving and investing should always be done with a knowledgeable adult’s guidance. It can be all too easy to lose all of your monetary gain just by making a bad investment decision.
What are the Benefits of Structured Settlements?
Court settlements and death benefits come in two different forms: a lump sum and a structured annuity. The lump sum of money is ideal for those who need to pay off large bills right off the bat, but the amount you pay in tax can be shocking. Federal guidelines will withhold 20 percent of your lump sum, reducing the amount you receive. State tax is also taken out and, while less than federal, can also be substantial. Structured settlements are ideal because they are essentially tax-free. The only time when tax is an issue is if you turn your annuity into a lump sum payment at any point in time.
For young people, the annuity is vested and protected so that the child or his parents do not have access to change it. This prevents anyone from spending the money prematurely and is fully safeguarded until the child turns 18. The payments received as part of the annuity never falter due to variable stock market dips. No bank maintenance fees are required to continue to obtain your monthly payments.
A major downfall to structured settlement agreements is the inability to change anything once it has been locked in. Your child or teen will only be able to do this once they reach adulthood. This could potentially be a problem if large lump sums of money are needed for medical bills or other emergencies. Even when the child turns 18, they can only change the agreement once before getting locked into it again.
How Are They Governed?
Almost all structured settlements are governed by insurance providers and the Federal Treasury. This prevents the annuity from being tampered with by creditors and other judgement. For example, if a young adult experiences a debt collection problem due to unpaid bills, their annuity cannot be touched. This can save lots of headache, heartache and time because you can still receive your much-needed monthly payments without giving it up because you are in collections.
The structured settlement option is ideal for most adults, but it is especially beneficial to younger people who would otherwise be irresponsible with a windfall of cash. Annuities are decided on the specific amount that is due and the term length. Tax is never deducted from this amount, so what you get from a settlement or death benefit is what you’re going to receive. Only a judge can initially govern the specific amount that you’ll get as form of payment. Once you or your child reaches adulthood, they have all the say in how that money is vested and spent.