An annuity broker, also known as a structured settlement broker, is a professional who specializes in negotiating and facilitating a payout schedule for a monetary settlement that has been awarded to an individual or family as a result of a lawsuit. Typically, the lawsuit arises from an injury caused by the defendant’s negligence, and both parties agree on a compensation amount to settle the case without resorting to a jury trial. When an injured party chooses this option, they gain several advantages, the most notable of which is a reduction in legal fees associated with being represented by an attorney if the case had gone to trial. Furthermore, a structured settlement provides a consistent stream of supplemental income over a long period of time, often for the rest of one’s life.
Structured settlement payments are treated differently than regular income under US Congressional legislation passed in 1982, which declared these payments to be tax-free on both the federal and state levels. This is in stark contrast to a lump-sum settlement, in which any profits made from investing the funds are taxed. The settlement funds are received and distributed by a third party, usually an insurance company, and are technically defined as structured annuity payments.
Using the services of a structured settlement broker also has a number of advantages. First and foremost, this person is in charge of establishing the settlement payout schedule. Payments are usually made on a monthly basis, but they may be made more frequently if the broker deems it necessary. In addition, if an unexpected expense arises, such as the need for a new wheel chair, a structured settlement broker can arrange for periodic increases or advances against the settlement.
One of the most important roles of the structured settlement broker is to determine the ongoing medical costs that the injured party will be responsible for, such as physical therapy, a home nurse, medications, and so on. These additional costs are, of course, added to the injured party’s and his or her family’s regular living expenses. These projections are particularly important in the construction of a successful structured settlement because they are required to determine the amount of annuity payments to be made and must also account for expected cost of living increases over the recipient’s lifetime.
Brokers who specialize in structured settlements are a select group of professionals. In fact, the Department of Justice registers only a few hundred qualified structured settlement brokers in the United States. The broker must be licensed or authorized to act on behalf of at least one insurance company, and he or she must be covered by an Errors and Omissions policy or its equivalent. It’s also worth noting that anyone with a felony conviction or a revoked insurance agent or broker license is ineligible for consideration.