There are two methods of funding the MSA allocation that are acceptable to The Centers for Medicare & Medicaid Services (CMS):
1) In a Lump Sum (full value).
2) Funded with a Structured Settlement (present value)
The Lump Sum method requires you to take the cost of your future medical exposure over the claimant’s life expectancy and pay it all up front today! Not a wise use of your settlement funds. This method of funding can keep the parties from settling due to the high cost of the MSA.
The structured MSA, with a combination of “Seed” and “Annual” payments, allows you to take advantage of the present value/cost of the “Annual” payments. This is accomplished by using the present value or cost of a structured settlement annuity to fund the annual payments over time. Again, this is allowed by CMS!
NOTE: CMS will not allow you to give the claimant the present value of the MSA. CMS is looking for the “annual” payments to be issued or structured by an annuity company as per the MSA report or CMS approval.
The benefits of structuring the MSA over funding it in a lump sum:
1. A structured settlement cost is partially based on the present value – potentially saving you thousands or even hundreds of thousands of dollars. A lump sum cost is usually based on the claimant’s ‘expected lifetime’, or full value.
2. A structured settlement using a rated age reduces even further your present value cost over the standard present value cost. A single lump sum cost using a rated age only reduces your ‘full value’ cost by a few years/dollars. A lump sum MSA with a rated age does NOT take advantage of present value.
3. A structured settlement can use the highest rated age to determine the final annuity cost in order to maximize your cost savings. A single lump sum cost is limited to using the ‘median’ rated age.
4. A structured settlement, by way of annual periodic payments, cannot be dissipated in full prematurely. A single lump sum cost can be prematurely dissipated in full by the claimant when self-administered.
5. A structured settlement can reduce the cost of your MSA, freeing up additional monies that can be used for additional Cash Up Front, Attorney Fees, Indemnity and Other. A single lump sum cost increases the cost of your settlement.
Need a quote at no cost?
Contact us at 323-887-9200 We can usually provide you with a quote if you simply provide us with a copy of your MSA report.