The answer to whether an injured seaman should choose annuity settlement payments or a lump sum for a Jones Act claim is: it depends. There are pros and cons of each method, and it’s important to weigh the options before making a decision.
Types of Settlement Payment Options
When an injured seaman is awarded a Jones Act claim settlement for damages, he or she may be given the option of choosing either a lump sum or annuity payments.
The two options a seaman would be offered from a Jones Act claim settlement:
- annuity payments – annuities are structured settlements or periodic payments. This type of settlement payment option often comes into play for very large settlements in catastrophic accidents. Structured settlements can be made to the injured seaman (or his or her family in the case of fatal accidents) automatically each month for a pre-determined amount of time.
- lump sum payments – lump sum payments are those in which the injured party receives a single check for the entire settlement amount, and are generally the chosen option for smaller settlements.
The Pros of Annuity Payments
There are several pros of choosing a structured settlement, including:
- tax benefits (recipients get a tax break as long as they’re not in control of the funds);
- greater fund preservation (when workers receive annuity payments, they are often better able to manage their money);
- flexibility (annuities can be structured to meet the seaman’s current and future monthly needs);
- unanticipated needs preparation (a portion of a structured settlement can be allotted for possible unanticipated needs, such as new medical treatments); and
- better negotiations (annuities can be used as a tool for negotiations when it’s difficult to reach a settlement, and might help avoid an expensive trial).
The Cons of Annuity Payments
Although structured settlements provide some perks, they are not for everyone. Some of the cons of annuities of which injured seamen should be aware when settling their Jones Act claim include:
- the possibility of taxation on the settlement;
- insufficient monthly payments because of unforeseeable economic conditions; and
- less actual funds in pocket because of the number of involved parties (i.e., insurance company, the seaman, the employer, a financial professional that manages the money, and an annuity company).
It’s important to note that claimants might also have the option of combining the two forms of payment options. It’s possible to receive an initial larger payment (lump sum), and then receive regular monthly payments thereafter.
The combination payment helps pay for the seamen’s immediate expenses, such as:
- medical bills;
- debt repayment;
- rehabilitation costs; and
- regaining financial viability after a maritime accident.
Legal Info on Jones Act Claim Settlement Options
It’s best to address your questions and concerns about your or your loved one’s Jones Act claim settlement payment with an attorney to receive answers specific to your situation.
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