The quick answer – a structured settlement is a financial arrangement in which a claimant receives periodic payments over time rather than a lump sum payout, typically resulting from a legal settlement. These settlements are often used in cases involving personal injury, wrongful death, or workers’ compensation to provide long-term financial stability for the injured party or their beneficiaries.

Structured settlements were created as a means to provide long-term financial security and stability for individuals who receive large sums of money because of personal injury, wrongful death, or workers’ compensation claims. Structured settlements provide tax free financial stability, protection against mismanagement, and tax advantages.

A structured settlement is ideal for individuals needing long-term financial as it provides a steady, tax-free income stream over time, protecting against the risks of quickly spending a lump-sum payout. This option is especially beneficial if you require income replacement, ongoing medical care, want a customized payment schedule, or lack experience managing large sums of money. It ensures predictable, consistent financial support, tailored to your specific needs and life events.

For injured parties, structured settlements provide a tax-free income stream without fear of money mismanagement or market fluctuations. Typically, upfront cash for attorney fees, medical expenses and related liens are included in the package. If it qualifies under section 104(a)(2) of the internal revenue code of 1986 as amended, payments are tax free. In the event of the injured party’s death, a guaranteed (also tax-free) portion of the settlement may be made to the estate or a named beneficiary such as a spouse or child. To qualify for the income tax benefits of a structured settlement, the recipient cannot accelerate, defer, increase or decrease the payments. The payments also must be fixed and set at the time the settlement is created. The money used must come from the defendant or its insurer in an amount no greater than the original liability.

Your structured settlement broker plays a vital role in facilitating the process by providing expert advice, handling documentation, and ensuring ongoing support with annuity payments. They act as your advocate, ensuring your financial interests are protected throughout the settlement process.

Structured settlement brokers are typically involved in initial and ongoing consultations with the defendant, attorney and injured party. They prepare annuity price-benefit analysis, create and review settlement documents, attend court hearings, mediations and settlement conferences and are responsible for issuing the annuity policy to the plaintiff.

Yes. They are called “non-qualified” structured settlements. Non-qualified structures are for non-physical injury settlements that fall outside the tax-free physical injury claims definition outlined by IRS tax code. These taxable settlements often involve employment litigation, punitive damages, contract disputes and construction defect claims. For more, here is a quick video from MetLife with an overview.

No, once a structured settlement annuity contract has gone into effect, the terms and payments cannot be altered.