Is a Bill 22 Annuity As Good As a Lump Sum?

Are you a day trader who wants to take advantage of options like single stock x/y positions and would therefore like to know what the difference is between paying for your options and receiving a lump sum? Many traders ask this question when they are deciding whether to cash in their put option or call option. lump sum versus payments are also a debate that continues to rage between investors worldwide.

The reality of the situation is that it’s hard to come up with a clear-cut answer which would be applicable to both types of investment, but the truth of the matter is it is definitely not possible to make a decision which is applicable to either lump sum versus payments or annuity. In this piece, we will discuss a few of the most important differences between lump sum versus payments and annuity. Hopefully by the end of this discussion, you should have a much better understanding as to why the market value of these investments may vary from one brokerage to another.

One of the most significant differences between lump sum versus payments is the workers’ compensation factor. When an investor receives a lump sum payment for a put option or call option, the value of the option or call option is subject to the workers’ compensation coverage that is in effect at the time of purchasing the option or placing the call option. Workers’ comp insurance is in effect to help defray the costs associated with injury or illness of covered workers. As such, if you receive a lump sum payment for a put or call option, you need to confirm from your broker that the insurance coverage will take place.

While the above is certainly one major difference between payments and lump sums, another difference of significant importance is with respect to the taxation status of an arrangement such as this. In the past, structured settlements were taxed on a taxable income basis. However, recent changes in the tax law have resulted in this being changed to a non-taxable lump sum versus payments basis. Some financial planners and advocates have recommended to investors that the best case scenario is to receive the largest amount of capital gains available without having to pay taxes on it.

The major difference between the lump sum versus payments is determined by the structured settlement‘s accrual schedule. Under the structured settlement, the settlement value is accruing at a fixed rate throughout the lifetime of the annuitant. During the early years of the settlement, the value of the accrued capital (the “base”) is less than the payments that are made during later years. However, as time goes by, the base value of the settlement increases significantly, thereby resulting in a more lucrative profit from the annuity.

In Canada, there are currently two governing bodies that govern these types of agreements. They are the Canadian government and the Insolvency Practitioner Organization of Canada or IPO. As with all laws and regulations surrounding taxation, these governing bodies are also responsible for regulating the provision of this insurance in Ontario. One of the concerns from the opposition and some residents of Ontario is with regard to the possibility of receiving a bill 22 payout and having this taxation imposed upon their income. Both the Canadian government and IPO are bound by the provisions contained in the Canada Revenue Agency Act does not allow the regaining of a payment against an agreement entered into with this type of annuity.