When a loved one’s death was the fault of someone else, it could allow for a wrongful death settlement. These types of cases can arise from a variety of circumstances involving negligence — such as a motor vehicle accident, a defective drug, premises liability or medical malpractice.
Once a settlement has been reached, it is distributed to eligible parties through wrongful death compensation. This can be done through a lump sum payment, or the beneficiary(ies) may decide to put the money into an annuity. So what are annuities, and how do they work?
What are annuities and how do they work?
When someone receives a large sum of money, there is often the temptation to start spending it. Even those with intentions of putting some aside can find themselves dipping into the pot so often that it’s gone before they know it. Or they haven’t stopped to consider future financial needs. One way to avoid this is by having the money immediately placed into an annuity, also known as a structured settlement.
This type of financial product isn’t designed to be an investment; instead, it provides the person with steady payments that aren’t taxable. There is a great deal of flexibility in setting up an annuity.
Payments can be spread out over a few months, years or until retirement. Other options include having payments stopped for a period and restarted at another time. Annuities can be structured in such a way that payments increase each year to account for inflation.
One of the ways an annuity makes financial sense is when a loved one was the main source of income or at least contributed significantly to the family’s finances. Monies would continue to be made available to help cover the loss of earnings through wrongful death settlements. Or wrongful death compensation can be used to pay for other needs, such as future college funds for minor children.
Collecting an Annuity in Wrongful Death Settlements
As soon as a wrongful death settlement has been reached in a wrongful death claim, it can be put into an annuity immediately for wrongful death compensation. There is also the option to split the wrongful death compensation, receiving some as a lump sum payment and the rest in an annuity.
The lump sum would allow family to pay for immediate expenses, such as funeral costs and medical bills incurred as a result of the loved one’s injuries. Then the rest of the wrongful death compensation could be put aside into an annuity.
It’s important to understand who has the right to collect a wrongful death settlement. Priority is given to a surviving spouse, who is entitled to receive the entire amount if there aren’t children. Otherwise, the spouse would receive $50,000, plus half of the estate’s balance. The remaining monies would be distributed evenly to the children.
This is part of what an annuity is and how it works because most parents choose to have the children’s payments pay out over a period of time to coincide with important life events – such as the purchase of a new car, personal insurance and college – rather than arrive as a lump sum, which can be spent frivolously by youngsters who are unfamiliar with budgeting.
When there isn’t a spouse and only children, they would receive it all (again, divided equally). If there is no spouse or children, one or both surviving parents would receive the entire amount. Beyond this, it’s possible for other relatives also to recover wrongful death compensation from a wrongful death settlement.
New York Lawyers Know Annuities and How They Work
An attorney knows what an annuity is, how it works and may be able to assist with decisions concerning the advantages and disadvantages, along with other options that could be available. However, it’s beneficial to talk with a financial advisor. Legal counsel is most especially helpful when it comes to negotiating the settlement to ensure that what’s received is fair.
There are a lot of issues to be concerned with at the passing of a loved one, both immediate and future needs. An attorney can ensure that all are taken into consideration when seeking damages in a wrongful death claim. Find out more about annuities, unexpected death and N.Y. Est. Powers & Trusts Law § 5-4.1 on the Gacovino, Lake & Associates website in our newsletter, Torts and More Monthly.