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A structured settlement is used when a claimant accepts periodic payments as part of a financial or insurance arrangement, which the claimant agrees to accept certain number of periodic payments in return for securing the dismissal of a lawsuit usually arisen from a personal injury case. Structured settlements are sometimes preferred since a qualified claimant can choose to have federal income taxes waived.

Structured settlements are considered to be asset-backed security, which often the payments are guaranteed through one or more annuities that are purchased by the defendant (which is usually an insurance company). In some cases the defendant might assign the structured settlement to a third party, which then becomes responsible for all future payment obligations. In the United States there are laws and regulations that govern over the structured settlements both at the federal and state levels, which define all legal and financial aspects of the periodic payment arrangement.

In certain cases the structured settlement payments may be incorporated into “Medicare set aside arrangement” “special needs trust” in order to preserve a claimants Medicare and Medicaid benefits. Structured settlements have been endorsed by many of the biggest disability organization in the United States as one of the best means to compensate persons who have sustained disability due to personal injury.   

There are many companies that specialize in buying structured settlements in exchange for a lump sum payment, but before one considers engaging in such transactions it might be best to consult with a personal injury attorney or lawyer in order to consider the advantages or disadvantages of selling a structured settlement. Accepting a lump sum for a structured settlement might have certain tax ramifications, which are best discussed with a qualified accountant or financial advisor.

Be sure to do your own due diligence in order to further educate yourself about this subject. Not meant as legal or professional advice.

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