Tools & Techniques of Financial Planning Leimberg, Satinsky, Doyle & Jackson Monetary Settlement Planning

7-2 Structured Settlements  Payment for workers comp or personal injury in installments Entire amount is tax-free  Even though part of payment would represent interest May be for life or certain number of years Don’t have to invest lump-sum Can’t spend it all at once

7-3 Lottery Winnings  Generally paid over many years  Taxable  Can sell rights to annuity Dumb

7-4 Life Insurance Proceeds  Generally lump sum payment not taxable Annuity will include interest  Life insurance settlements Viatical  Life expectancy < 7 years  Terminal illness  Tax free

7-5 Life Insurance Proceeds  Life insurance settlements Life settlements  Over 75; < 12 years life expectancy  Health going down hill  Proceeds – cost of policy taxable

7-6 Lump Sum Distributions from Retirement Plans  Roll to IRA More investment options Tax deferred growth Life expectancy risk  Pay tax, do whatever you want Lots of tax  Future tax rates higher? Taxed on future income Life expectancy risk

7-7 Lump Sum Distributions from Retirement Plans  Or take an annuity Healthy  Life expectancy risk Don’t want to manage funds