STRUCTURED SETTLEMENTS

A Structured Settlement is an alternative to a lump sum cash payment in the resolution of personal physical injury, wrongful death, medical mal-practice and workers’ compensation cases. The settlement usually consists of two components: an up front cash payment to provide for immediate needs and a series of future periodic payments. The payments are funded by the defendant’s purchase of an annuity policy, Treasury bond program or reinsurance from a life insurer who makes the periodic payments directly to the plaintiff.

These payments may be made for virtually any length of time, even for the claimant’s lifetime. In the event of the claimant’s death, a guaranteed portion of the settlement may be made to his or her estate or a named beneficiary such as a spouse or child.

When is a Structured Settlement appropriate?

A Structured Settlement is most advantageous when plaintiffs require payment of funds over a period of time such as:

• Plaintiffs who require continuing future medical expenses.

• Plaintiffs (or dependents) who require replacement of lost future income.

• Plaintiffs who require a secure lifetime tax-free income.

• Any case involving a minor, since courts usually will not allow payments to be made directly to the minor until he or she reaches the age of majority.

• Workers’ compensation, disability, or death claims.

• Deferred payments for college education, retirement, home down payment or mortgage payments

What advantage does a Structured Settlement offer plaintiffs?
There are three major advantages that Structured Settlements offer. First, the Internal Revenue Service in Code Sections 104a(2) and 130C provide for periodic payments in personal physical injury and workers’ compensation cases to be income tax free to the plaintiff. Second, Structured Settlements prevent plaintiffs from dissipating settlement proceeds. Studies show that most recipients dissipate funds from a cash settlement within five years while their fixed financial needs continue. Third, Structured Settlements are protected from creditors.

Additional advantages to plaintiffs include:

• Receipt of a larger amount of money over time than could be obtained in a cash settlement.
• Guaranteed regular lifetime payments.
• Competitive long-term rates of return on the settlement principle.