Whether medical malpractice, product liability, workers compensation, auto or other general liability we can perform economic analysis by applying annuity technology to plaintiffs life care plan and economic/work loss projections. By so doing? Brant Hickey & Associates can evaluate the case in terms of actual cost and hopefully bridge the gap normally present in settlement negotiations. All proposals of structured settlement detail the annuitant, rated age, insurance carrier, benefits, guaranteed and expected, as well as cash flow schedules.
In 1992, "John Smith", a 46 year-old office worker suffered a physical injury within the course of his employment. In 1996, when his claim was finally settled, he had an option of taking a lump sum payment of $96,000. Instead, he elected to have that amount put into a structured settlement that will provide monthly payments throughout the rest of his life, with a 20 year guarantee. Each month, he receives a check for $600. What follows are the options and long-term ramifications of a lump sum vs. a structure in this case:
Note: This assumes a 3% annual return on investment, a 28 percent federal income tax and an annual payout of $7,200. The lump-sum payment would be dissipated in 17 years. Factoring in a state or local income tax would hasten the dissipation. All but eight states currently have income taxes.
$600 per month for life (20 years guaranteed)
* Expected payout based on normal life expectancy of 28.7 years for a 46 year-old.
Michael Claimant is a 47 year-old misdiagnosed cancer patient who lost significant use of his right leg due to a chondrosarcoma of the right pelvis. A modified right internal hemipelvectomy left him unable to continue his employment.
The case was settled using a structured settlement annuity to replace lost future wages on a net after tax basis along with lump sums for other lifetime needs. With a rated age established at 65, funding was established for a $3,500 monthly income for 20 years certain and continuing for life thereafter, increasing each year by 3% for a premium of $600,000 with an anticipated payout of $300,000 for the children's inheritance in the year 2017.
The structured settlement provided the guaranteed financial future of the injured party. The annuity premium was $850,000 with benefits to exceed $4.6 million over Michael's lifetime. In addition, all monies are tax free and will flow to his heirs or estate tax free as well. The plaintiff attorney also structured a portion of his fee on a tax deferred basis.