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PRODUCT
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STRUCTURED
SETTLEMENTS
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BANK TRUST
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EQUITY
MUTUAL FUND
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MUNICIPAL BONDS
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CERTIFICATE OF DEPOSIT
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What are the tax consequences?
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Income provided by a qualified structured settlement under Section 104(a) of the IRC are tax-free.
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Generally, income generated is fully taxable (except for some tax-free municipal bonds)
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Taxes must be paid as income is earned and distributed.
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Generally, interest is exempt from federal income tax. May also be exempt from taxes in state of issue.
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Earnings are fully taxable.
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What type of securities/insurance products support payments?
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A fixed annuity contract issued by a highly rated life insurance company.
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May be federally insured (up to $250,000) or non-federally insured products.
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Investment company operated fund, pooling assets and investing in equity securities.
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Debt instruments issued by state or local government.
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Debt instrument issued by a bank. Maturity options range.
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Can this option provide a stable, lifetime income?
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Yes. Payment designs can provide a dependable and predictable income stream that cannot be outlived.
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Income or return will depend on type and performance of investments.
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Higher degree of investment risk means potential for higher or lower returns.
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Bond must be help to maturity to receive the face value of bond.
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No. Pays a fixed rate that accumulates for duration of CD. Relatively low returns and penalties for early withdrawals. Inefficient for providing adequate income stream.
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Is there a guarantee with this option?
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Yes. The annuity issuer guarantees payments to be made based on claims-paying ability.
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Federally insured products up to $250,000 on treasuries or CDs. Others not guaranteed.
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No. Share prices and returns will fluctuate with investment performance.
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Interest is guaranteed for initial investment period. Afterwards, may be subject to change – up or down.
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Yes. FDIC insures deposits up to $250,000. The issuing bank guarantees amounts over $250,000.
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What are the costs and fees associated with this option?
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No additional cost to the annuitant.
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Annual bank management fees.
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Management and expense fees are deducted from returns. Others fees may be applicable.
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Issued at face value.
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None. Penalty for early withdrawals.
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Will this option keep pace with inflation?
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A cost-of living adjustment (COLA) feature is available.
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Depends on performance of investments.
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Total return will depend on performance of underlying securities.
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Does not provide hedge against inflation.
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Unlikely. CDs are considered a low risk/low-yield investment.
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Is this option
affected by market fluctuations?
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No. The benefit payments are fixed and not subject to change.
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Payment amount fixed, by duration may be effected by performance of investments.
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Share price and return will vary, depending on market conditions.
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Yes. Value will be affected by interest rate fluctuations and municipalities stated call options.
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Yield depends on interest rate based on market conditions. Rates may increase or decrease.
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Can I make changes to this option after I select it?
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No.
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Depends on types of securities and terms of trust.
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If monies are withdrawn or moved, charges, fees and taxes may apply.
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Yes. If sold/redeemed prior to maturity, value subject to market conditions. May result in gain or loss.
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N/A Penalty for early withdrawals.
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