| Issue / Concern |
Structured Settlement |
Education IRAs |
| What types of securities/insurance products support the payments? |
A fixed annuity contract issued by a life insurance company. |
Offers a variety of investment options and rates of return. |
| Can this option provide a stable, lifetime income? |
Yes. Payments and distribution schedule are determined up front. Can provide a dependable, predictable income stream that you cannot outlive. |
No. This option is designed only as a savings vehicle for qualifying educational expenses. |
| Is there a guarantee with this option? |
Yes. The annuity issuer guarantees payments, according to the terms of the structured settlement agreement. |
No guaranteed return on investments. |
| What are the costs and fees associated with this option? |
No additional cost to annuitant. |
Involves account management and securities management fees. |
| Will this option keep pace with inflation? |
A cost-of-living adjustment (COLA) feature is available that can help offset the effects of inflation. This option must be elected when the settlement is designed. |
Not predictable since investment returns will depend on market factors. |
| What are the tax consequences? |
Income provided by a qualified structured settlement is TAX-FREE, provided the damages received as periodic income (other than punitive damages) are the result of personal physical injuries or physical illness. |
Tax-deferred. Withdrawals are tax-free only if funds are used for qualifying educational expenses. |
| Is this option affected by market fluctuations? |
No. Benefit payments are determined and fixed at the time the annuity contract is issued. |
Yes. Any earnings from principal will be affected by market ups and downs. |
| Can I make changes to this option after I select it? |
No. The payment amount and schedule are fixed and may not be changed or accelerated. |
Subject to annual income and contribution limitations. Cannot be used with other education tax incentives. |