When a spouse dies, the surviving spouse and children are left with the overwhelming task of trying to establish a new normal. The hardship brought upon by this situation is further exacerbated when a wrongful death settlement is involved. Suddenly, the surviving spouse and family are forced to make financial decisions that they may not be equipped to handle. That’s where careful, customized planning can help.
Before committing to a particular financial plan, the first step is determining the family’s needs and goals. If the decedent was the primary breadwinner, then a greater percentage of the settlement proceeds might need to be allocated towards general living expenses, as opposed to the loss of a non-working spouse where the proceeds may be better suited for long-term investments. Likewise, a family with young children will have different needs than a family with grown children or no children at all.
In devising a plan, many claimants lean heavily on their attorneys for guidance, which is why the attorney’s referral of a trusted settlement consultant is so important. Introducing the settlement consultant early in the process allows time for the consultant and the family to build trust and to create the foundation for a robust settlement plan.
To illustrate, here are two examples of how a settlement consultant might approach recommendations for surviving family members based on their individual needs and goals:
Example #1: Stay-at-Home Spouse with Three Young Children
Ken is a stay-at-home dad with three children under the age of thirteen. His wife, Wendy, worked in the tech industry and was the primary income earner. Ken has gone back to work since his wife’s death but is concerned about maintaining the same standard of living and saving for their children’s college education.
Ken may want to consider…a structured settlement annuity.
A structured settlement annuity provides a safe spot for the settlement funds to grow tax-free. Structured settlements are flexible in design, so with the help of his settlement consultant, Ken can create a plan that works for his family, including:
- Monthly income tax-free structured settlement payments to supplement his income and help pay for childcare costs; and
- Income tax-free lump sums to fund college plans for each child.
Example #2: Mid-Fifties Working Spouse with No Children
Janet is a 56-year-old widow who works full-time. Her husband, Marcus, provided about 40% of their income, which they were able to save. Janet would like to pay off the balance of their home mortgage and an outstanding car loan but isn’t sure what to do with the rest of the money.
Janet may want to consider…a market-based structured settlement.
Janet can take a portion of the settlement, income-tax-free, and use it to pay off the balance of her home mortgage and car loan. She could then use the remaining money to fund a market-based structured settlement, which uses a market-based investment portfolio as the financial vehicle, rather than an annuity. Janet’s structured settlement could provide her with:
- Semi-annual income tax-free payments to cover the cost of property taxes; and
- Monthly income tax-free payments starting at age 65, in an account managed by her personal financial advisor, to supplement her retirement income.
Contact Sage Settlement Consulting to Learn More
Our experienced settlement consultants have worked with thousands of families grappling with the loss of loved ones. For more information about customized settlement solutions, contact us today.