Are you considering a full and final settlement of your personal injury claim or Accident Benefit claim? A structured settlement may be a viable investment option for you so that you do not have to worry about how to manage a large lump sum of money.
With the consent of the insurance company involved in your claim, a structured settlement is an alternative to a lump sum settlement payment. The decision to have a tax-free structured settlement must be made when the claim is resolved. Once a lump sum payment has been made, you cannot enter into a structured settlement agreement.
Similar to an annuity, structured settlement money is paid to you over a period of time rather than all at once. The payment options are unlimited and can be tailored to best suit your financial needs and lifestyle. Structured settlement payments are a risk-free investment that will provide secure ongoing income.
The payments are guaranteed for a specific period of time, again depending on your financial needs, and they are all tax free. A structured settlement company will work with you to design a plan for the duration and frequency of payments, the start date for payments and even periodic lump sum payments
The decision on how much to structure, payout amounts and duration of payments is yours to choose. The Canada Revenue Agency considers structured settlement payments to be compensation for personal injury damages.
The CRA does not consider the payments to be income, therefore, you never pay taxes on the payments that you receive. If the structure is designed to provide lifetime payments, your tax-free income is guaranteed to never run out. Structures can also be designed to protect your estate so that a specified period of guaranteed payments will continue whether you are alive or not.
Another reason to choose a structured settlement: The Ontario Court of Appeal recently ruled that payments received from a structured settlement are like “disability income” and not a pension. This is important in the Family Law context because the structured settlement is not viewed as property and therefore is not subject to division between divorcing spouses.
The decision you are about to make is an extremely important one. Protect your future and consider the benefits of investing your settlement funds into a structured settlement.