Understanding Structured Settlements: What You Need to Know

When a person or company wins a civil case, they may receive compensation for their injuries in the form of a structured settlement. This type of agreement is designed to provide the injured party or their family with a steady flow of periodic payments, usually over many years. Structured settlements are tax-free and can be customized to meet the needs of the recipient. A structured settlement annuity is an insurance policy funded by the defendant's insurer that provides the plaintiff with periodic payments.

The Federal Periodic Payment Settlement Act of 1982 requires court approval for all sales of structured settlements to ensure that the best interests of the consumer are taken into account. Structured settlements are most commonly used in cases involving personal injury, wrongful death, or workers' compensation claims. The more serious the injury, the more likely it is that a structured settlement will be used. When deciding whether to receive payment for a lawsuit through a structured settlement, you can choose to start receiving funds immediately or at a later date.

If you experience changes in financial circumstances and are unable to obtain funds through conventional financing or other sources, you may be able to sell your annuity or structured settlement payments. A representative can provide you with a free, no-obligation quote. It's important to consult with a tax professional, accountant, or financial planner to determine how the structure of your award or settlement will help you maximize your outcome based on your personal circumstances and goals. Taking the prize as a structured agreement can help you resist any pressure to accept a lump sum payment.