Structured Settlements

A structured settlement is a financial or insurance arrangement that a claimant accepts as a result of winning a lawsuit judgment. Structured settlements are in lieu of a lump sum settlement. This means instead of receiving the total value awarded at the time of settlement, you establish payment installments over a period of time. These are called "periodic payments". Structured settlements are now part of the statutory tort law of several countries that were once ruled by England including: Australia, Canada, England and the United States. Each of these countries has its own definitions, rules and standards for structured settlement. The United States has enacted structured settlement laws and regulations at both the federal and state levels.

With a structured settlement several things come into play in the decision making process.

First, know yourself. What type of lifestyle do you currently hold or expect to create after the settlement.
Second, how long do you want to receive payments? This helps you determine how much to receive upfront and in installments thereafter. Typically, the defendant would purchase an annuity (from an annuity or insurance company) for a dollar amount that is paid up front. The annuity provides regularly scheduled income payments as specified by you and your attorney under the terms of the structured settlement.

Will you receive tax benefits through settlement payments or receiving a lump sum instead.
Most importantly structured settlements involve setting a settlement amount that will benefit you most. You cannot go back and change it later. For this reason, it is important retain a good attorney and tax adviser that will help negotiate a settlement that meets your terms. Also, there are requirements as well as benefits of structured settlements such as tax and spendthrift issues.

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