What is a structured settlement?

In some cases, personal injury claims are settled by exchanging a sum of money for a release of the claim. However, a growing trend in personal injury law is the structured settlement; instead of an immediate lump sump of money, structured settlements provide future payments which are structured over time to meet ongoing financial needs - depending on the type, structured settlements can extend over a person’s lifetime, or simply over a few years. Many (in fact most) structured settlements also include an immediate cash payment. Usually, structured settlements are orchestrated through the use of annuities, which will guarantee the future payments.

Structured settlements are advantageous because they tend to help plaintiffs avoid tax liabilities and help protect the plaintiff by ensuring funds will exist for a long period of time, especially if a plaintiff has money management problems or would be tempted to “share the wealth” with family members or friends until the cash is gone. However, many do take lump sum settlements and manage their money themselves, which affords the plaintiff more flexibility.