Playbook #047: Structured Settlements
🖼️ The Big Picture
Structured Settlements are annuity payments that can be made over many years to the winner of a lawsuit - a person or the family of someone - who was injured, killed, discriminated against, wrongfully imprisoned, or otherwise seriously harmed.
If you read our issue on Viatical Settlements, this is similar in that the value you’re providing the seller is based around the “time value of money” - which is simply that the same sum of money is worth more today than it is later. So for example, a settlement paying out a total of $1,000,000 over 10 years might be acquired for $900,000 today.
Where Viatical Settlements completely tie up your money until the life insurance policy’s death benefit is paid, Structured Settlements can provide cash flow with strong guaranteed returns for a set period of time. They come in all kinds of structures - monthly, annual, and even 5 or 10 year payments.
If you have an abundance of liquid capital you’re willing to tie up, the benefits are strong: cash flow (depending on the terms), strong returns, and very low risk (the insurance company would have to go broke, which is extremely rare). Plus, and this is our favorite part… personal injury settlements are completely tax-free, meaning that a 5% return on a structured settlement is more like a 6.6% - 8.3% return pre-tax, depending on your state and federal tax rates. Unlike other traditional investments, they don’t have any management fees. The only cost is liquidity.