|Of the various goals presented during settlement negotiations, first and foremost is the optimization of settlement dollars. Another is to ensure the long standing security beneficiaries. We believe that using a variety of financial tools can enhance the settlement being offered and presented. Using a structured settlement annuity as the cornerstone of a settlement helps the claimant by offering lifetime benefits tax-free; however, the disadvantage to a structure is that it offers no liquidity.
By combining a structured settlement with a laddered bond portfolio in a Settlement Security Trust (SST), you can provide access to cash to individuals in times of crisis whil continuing to offer safety and investment growth over time. We select investment grade, non-callable, insured municipal bonds within a SST (also known as an Intentionally irrevocable trust for medicaid planning). By using laddered maturities, we stagger the dates to offer the individual various yields to produce a diversified portfolio.
The advantages of the laddered bonds are diversification, liquidity and flexibility. Municipal bonds are federally tax-free and our choices are non-callable, meaning they have a provision that prohibits the municipality from redeeming the bond until maturity.
The primary purpose of using a SST is to protect the property from wasteful dissipation by the individual. However, the secondary purpose of the Trust permits limited discretionary distribution for major medical expenses, payment of tax liabilities, education provisions and emergency needs at undetermined times.
For those who own a bond, collect the interest and hold it to maturity, market volatility is irrelevant. An active secondary market allows for the purchase and sale of bonds prior to maturity to accommodate the changing needs of individuals from unplanned events.
BENEFITS OF USING A SST
- Protection of wealth/assets
- Protection from creditors
- Estate tax benefits
- Tax Rate/Tax Deferral Benefits
- Irrevocable (cannot be annulled, changed or terminated)
Further Reading: Domestic Asset Trusts & Structured Settlements, and trusts in general.