A structured settlement is an arrangement where a claimant receives periodic installment
payments for damages rather than a lump sum of cash. They became popular in the 1970's
because they provided the claimant and their family some long term financial protection, and could
be settled out of court. The US government officially recognized structured settlements in 1982, and
they continue to be utilized today as a way for a damaged party to receive compensation.
One of the greatest advantages that a structured settlement has over a lump sum award is that the
structured settlement is free from state and federal taxes. A structured settlement will also allow a
claimant to continue to receive any public assistance for which they are eligible, where a large cash
award could cause the loss of public assistance money.
Structured settlements can be an attractive option for a defendant in a lawsuit because they can
save a lot of money. The amount of the settlement can be significantly lower than the potential civil
court judgment. Attorney fees will also be much lower to negotiate a structured settlement
agreement than to defend a client in a lawsuit.
A structured settlement offers a claimant a variety of options for receiving their money. Periodic
payments can be disbursed monthly, annually, or some other agreed upon schedule. A portion of
the money can be paid as a lump sum up front, or for a future event like college expenses, medical
costs, and retirement. The flexible nature of these periodic payment agreements allows a
damaged party to design a payment plan that specifically meets their short and long term financial
needs. Setting up the structured settlement must be done carefully because once final, the
flexibility is gone and the parties are bound to the agreement.
Before entering into a contract to receive compensation by way of a structured settlement, a plaintiff
should seek professional advice from a financial planner. One should also choose an attorney
who is well versed in structured settlement law. Settlements can be well in excess of a million
dollars, and sound financial planning is essential to properly provide for the needs of the injured
parties.
When designing a structured settlement contract, remember that because the agreement will
remain in place for years, or even for the lifetime of the claimant, inflation can have a devastating
effect on the long term value of the settlement. Properly constructing a plan that takes inflation into
account is essential for long term agreements. Structured settlement companies offer equity
annuities with long term growth to combat the eroding effects of inflation on a settlement.
If you are considering selling your structured settlement payments for a lump sum of cash, you
should seek a company that has the competence and experience to get you the largest amount of
money possible. The Structured Settlement Alliance works with the best direct funding sources, not
high commission brokers, so you will find the right financial institution to purchase your annuity
payments. Your personal information will remain confidential, and you will receive the information
and advice you need to make this important decision.
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What Are Structured Settlements?
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