The Difference between Annuities and Structured Settlements
While you might be tempted to put both annuities and structured settlements into the same category of financial instruments, they are similar, but not the same. Both include regular payments over a set amount of time, but they two are different legally and are handled differently as investments and for tax reasons.
Annuities
An annuity is a financial tool available from insurance or investment companies. An annuity is a type of investment that includes a return on the investment - not just a steady set of payments. There can be various beneficiaries for the different sort of annuities as well. Lottery winnings can be arranged as an annuity also.
Structured Settlements
A structured settlement is the result of a court settlement. Rather than going to trial, one part in a court case decides to settle, and the structured settlement is the form of payment that is arranged as part of that decision. A lump sum is divided into a series of payment that the recipient will get over time, or deferred payments. Structured settlements are generally not inheritable and they are not investments. They are simply a long-term payment plan.
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