structured settlements

What Are Structured Settlements?

Structured settlements are financial packages that entitle a claimant to receive a fixed payment for an agreed period of time. Structured settlements are normally arranged for successful insurance, medical or personal injury settlements and payment will normally be made through an annuity from a life insurance company. There are many benefits to both the claimant and the defendant to reaching this type of settlement, as opposed to the claimant receiving a one off cash settlement.   

The use of structured settlements to reach a between the claimant and the defendant are strongly advocated my many as an alternative to a one off lump sum cash settlement. It has been estimated that some 90% of accident victims spend their personal injury settlements within 5 years. Structured settlements, on the other hand, provide a regular, secure and easily managed income stream and can eliminate the expense and stress that can be associated with managing large sums of money. However, since each case is unique, the settlement can be tailor-made so that the claimant receives some immediate payment to cover any special damages or expenses.

In the U.S, structured settlements are governed by the IRC (Internal Revenue Code), which state that compensation received for personal injury settlement or physical sickness is not included in gross income. There are many tax advantages associated with this type of settlement rather than receiving a one-off cash for structured settlement payment. Since the annuity payments are fixed for the lifetime of the claimant, often over the long term, they will receive a greater sum of money.

Structured settlements can be advantageous to the defendant also since first and foremost, they offer the termination of any legal liability. This is particularly important if the case is pre-trial, since it offers the defendant the opportunity to avoid the possible ramifications of a jury trial and any associated litigation costs. The settlement will often be more beneficial to both parties since the claimant will receive their expected payout, but due to the time value of money, the defendant will have achieved a settlement closer to their desired outcome. Structured setttlements

Next > Life Settlements