LMA's Settlement Asset Allocation Plan
If you have received settlement funds resulting from a personal injury or wrongful death, investing wisely is critically important. Your settlement funds must cover a lifetime of needs that are vastly different from the average investor.
LMA's unique Settlement Plans tackle the complex financial issues facing you. The core financial features of our plans are described below.
Structured Settlement Annuity
A steady, tax-free income over an agreed-upon length of time
- The Internal Revenue Code designates structured settlement payments and any income they produce as tax-free(i). This is a major advantage over cash settlements.
- A structured settlement annuity can provide up-front cash to cover expenses you have already incurred, and a series of periodic payments designed to help meet your unique future needs.
- Payments can be scheduled for varying lengths of time, even for life(ii).
- Payments can be equal installments, or a deferred lump sum.
- Payments can be fixed or can include cost-of-living adjustments.
- Custom design is the hallmark of our process. We tailor a stream of payments to your monthly, annual, and deferred income needs—from medical expenses to college tuition to retirement.
Stocks for long-term capital growth
- Stocks represent an ownership interest in a company. As the company grows and prospers, the stock is likely to gain value.
- Stocks can be volatile over short periods of time; therefore, they do not serve as well as a guaranteed, tax-free settlement annuity in providing steady income.
- Over the long-term, however, stocks have shown the best total return. They provide long-term capital growth and protect against inflation(iii).
- Managed Accounts or Mutual funds are an easy way to diversify stock holdings and lower risk.
- Managed Accounts or Mutual funds are flexible; they can be traded and sold to provide cash for unforeseen needs.
- LMA addresses your injury-specific needs and your personal goals by building a portfolio that helps achieve results while managing risk(iv).
Money Market Funds(v)
Readily available cash
- Money market funds are short-term debt instruments issued by companies or by the government. Their value tends to be stable; therefore, they may be appropriate for very short-term needs or to add stability to stock investments.
- Excess cash from settlement annuity payments can be placed in a money market fund and accessed by a debit card or a checkbook.
- Your money market contains funds to cover your expenses for a year, based on proper analysis of your needs and goals. Regular benefit payments from your settlement annuity fund the money market, and can be supplemented when necessary by sales of mutual funds. This allows you to concentrate on recovery—not on your financial planning.
Term Life Insurance
An optional buffer against loss of caregiver
- If a family member has become your primary caregiver as a result of your injury, or if a wrongful death has left you as a single parent, term life insurance is a relatively inexpensive way to protect against future hardships.
- The term life policy can purchase or replace certain essential services in the event of a caregiver's untimely death.
Make the most of your settlement dollars
- Under Section 104(a)(1) and (2) of the Internal Revenue Code, income and principal received from structured settlements are income tax-free.
- Capital gains taxes are lower than income taxes. Using a tax-free settlement annuity for your steady income means that your managed money/mutual funds can be left to provide long-term capital growth. When sold, they may incur the lower capital gains tax.
- LMA's Settlement Plans can be designed to minimize your estate tax issues
In addition to the core financial features described above, our plans can offer the following "Plus" financial feature.
An option to enhance and help protect settlement proceeds
- Special Needs Trusts allows you to use your settlement funds, while still preserving your eligibility for programs that have strict financial eligibility limits, such as Medicaid.
- Qualified Settlement Funds can facilitate the resolution of complex funding issues.
(i) In order for the claimant to receive an income tax-free structured settlement annuity, certain administrative requirements must be met to satisfy Internal Revenue Code Section 130 and Section 104(a). A claimant cannot accept a cash settlement and then purchase an income tax-free structured settlement annuity on his/her own. Instead, funds used to purchase settlement annuities generally must be paid to the issuing life insurance company directly by the defendant's insurance company.
(ii) Changes to the payment schedule or amounts are not allowed once the structured settlement is in place.
(iii) Mutual funds are sold by prospectus, which contains more information including charges and expenses. Please read prospectus carefully before investing.
(iv) LMA regularly reviews asset class and fund correlations in an effort to identify suitable candidates for allocation models.
(v) Money market funds are neither FDIC insured nor guaranteed by the US government. There can be no assurance that the fund will be able to maintain a stable net asset value (NAV) of $1 per share.