I have a child comin with a settlement how do i choose the right option for either lumpsum or structure annuity.when i get confusing answers from the attorney?
i need someone who knows abt settlements for minors..?
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Lauren F
February 28, 2010 at 4:49 am
It depends on what earnings rate they are assigning to the annuity or how much the lump sum is. Normally, it would be expressed something like “settlement of $10,000 lump sum, or annuity of $125 a month for 18 years”. I would find out those two figures (lump and monthly) and then talk with a banker or an investment advisor. Ask them simply “If I invest my $10,000 lump sum with you, how much could I get for a monthly annuity to last 18 years?”. You can get several insurance companies to give you a quote. The one with the highest amount of monthly annuity payment is giving you a better deal than the others. You also want to find out if the payment is guaranteed for the full amount of time, or if it will stop if the person receiving the payment dies or is disabled.
Now which one to pick really depends on what other sources of income you have, and whether this payout is for you or in trust for your child. If it is in trust for your child, there may be strict limits on what it can be used for.
If it is straight to you, then you have to think about what you will do with either option. If you get the lump sum, can you pay off all debts and live on what is left of your income without any supplement from an annuity -then if so, go that way. If you need this annuity to pay your monthly expenses, then you want to go that way.
You may want to look into the financial planning association’s website (www.fpa.org) and see if you can get a certified financial planner to run the numbers as a comparison for you. They often have folks who will help out on a pro bono basis. See http://www.fpanet.org and try to find one in your area. Even if you have to pay $100 for an hour’s consultation, it is worth getting expert advice about the value of the settlement before signing any papers.