Learning About Structured Settlements

A structured settlement is a financial arrangement in which a claimant in a lawsuit agrees to resolve a tort claim involving personal injury by agreeing to a periodic payment obligation from the defendant.

Scottsdale, AZ (prHWY.com) April 12, 2012 - A structured settlement is a financial arrangement in which a claimant in a lawsuit agrees to resolve a tort claim involving personal injury by agreeing to a periodic payment obligation from the defendant. Generally, a defendant purchases an annuity from an annuity or insurance company that provides for scheduled payments as specified by the claimant and the claimant's attorney according to the terms of the settlement.

Usually when a person wins a judgment, the defendant has to pay the amount of the judgment or settlement in a lump sum. Depending on a claimant's circumstances, a structured settlement may be more feasible since it allows the settlement recipient to be paid in installments over time. Payments can be structured in one of several ways to suit a recipient's needs. Options can range from simple annual payments to more complex arrangements comprised of an initial lump payment and indexed monthly installments, deferred installments, or other provisions related to future welfare or death of the recipient.

The main advantage of structured settlements is that they guarantee the recipient a source of income for life. The recipient may also be able to drastically reduce the taxes paid on the money that would otherwise accrue from receiving a lump sum settlement. The major disadvantage of a structured settlement is that once it is agreed to the terms cannot be changed at a later date, although it is possible to later opt for a structured settlement factoring transaction that allows the recipient to sell all or part of expected future payments for an immediate lump sum.

While reading about structured settlements may help inform a prospective recipient of his or her options, it is highly advisable to be represented by both a competent attorney and a good tax advisor in order to help negotiate a structured settlement that meets the person's particular needs.


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Categories: Finance

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