Structured annuity settlements are an option for individuals who receive a settlement or award from a lawsuit, but would like to receive their payments over a period of time rather than a lump sum.
These settlements can be beneficial for individuals who want to ensure a steady stream of income over a long period of time, or for those who are concerned about managing a large sum of money.
When it comes to structured annuity settlements, there are two main types of rules that can be used to determine the payment schedule: h1 and h2 rules.
In this article, we will explore what structured annuity settlements are, how they work, and the differences between h1 and h2 rules.
What is a Structured Annuity Settlement?
A structured annuity settlement is an agreement between the plaintiff (the person who won the lawsuit) and the defendant (the person or company who lost the lawsuit) that the plaintiff will receive payments over a period of time instead of a lump sum.
These payments are typically made through an annuity, which is a financial product that provides a guaranteed stream of income for a set period of time.
Structured annuity settlements are often used in personal injury cases, where the plaintiff may have suffered a long-term or permanent injury that requires ongoing medical care.
These settlements can also be used in cases where the plaintiff has lost a loved one and is seeking compensation for the loss of income or support.
How Do Structured Annuity Settlements Work?
Structured annuity settlements are typically negotiated between the plaintiff and the defendant’s insurance company. The insurance company will purchase an annuity from a life insurance company, and the plaintiff will receive payments from the annuity over a period of time.
The payment schedule for the structured annuity settlement is determined by the h1 or h2 rules. These rules are used to calculate the amount and frequency of the payments, and they can have a significant impact on the overall value of the settlement.
H1 Rules
H1 rules are the most common type of payment schedule used in structured annuity settlements. Under h1 rules, the plaintiff will receive a set amount of money on a regular basis for a specified period of time. For example, the plaintiff may receive $1,000 per month for 10 years.
The payments made under h1 rules are fixed and do not change over time. This means that the plaintiff will receive the same amount of money each month, regardless of any changes in their financial situation.
H2 Rules
H2 rules are less common than h1 rules, but they can be beneficial in certain situations. Under h2 rules, the plaintiff will receive a set amount of money on a regular basis for a specified period of time, but the payments will increase by a set percentage each year.
For example, the plaintiff may receive $1,000 per month for 10 years, with the payments increasing by 3% each year. This means that the plaintiff would receive $1,030 per month in the second year, $1,060.90 per month in the third year, and so on.
The payments made under h2 rules are adjusted for inflation, which means that the plaintiff’s purchasing power will remain relatively stable over time. This can be beneficial for individuals who are concerned about rising costs of living.
Which Rule is Right for You?
Deciding which payment schedule to use in a structured annuity settlement depends on your individual financial situation and goals. H1 rules are the most common and provide a guaranteed stream of income over a set period of time.
H2 rules can be beneficial for individuals who are concerned about inflation and want their payments to increase over time.
It is important to work with a financial advisor or attorney who has experience with structured annuity settlements to determine which payment schedule is right for you. They can help you understand