Understanding Structured Settlements

Structured settlements are a powerful financial tool designed to provide long-term security and peace of mind for individuals who have received compensation from personal injury, wrongful death, or other legal claims. Instead of a single lump sum, recipients receive a series of scheduled payments, often funded by an annuity from a highly rated insurance company. This arrangement ensures a steady stream of income, helping claimants manage medical expenses, living costs, and future needs without the risk of quickly spending a large sum.

A Brief History of Structured Settlements

Structured settlements originated in the United States in the 1970s, following high-profile cases like the Dalkon Shield litigation. Lawmakers recognized that many injury victims who received large lump sums quickly exhausted their funds, leaving them financially vulnerable. In response, Congress passed legislation encouraging the use of structured settlements, including the Periodic Payment Settlement Act of 1982. This act provided tax advantages for recipients and helped establish structured settlements as a preferred method of compensation in personal injury and wrongful death cases.

Today, structured settlements are widely used in the U.S., Canada, and other countries. They are especially common in cases involving minors, catastrophic injuries, or long-term care needs, where financial stability is crucial.

How Structured Settlements Work

When a structured settlement is agreed upon, the defendant or their insurer purchases an annuity from a reputable insurance company. This annuity funds the payment schedule outlined in the settlement agreement. Payments can be customized—monthly, quarterly, annually, or even as future lump sums for major expenses like education or home purchases. The recipient benefits from guaranteed, tax-free payments for the duration of the agreement, often for life.

Structured settlements are designed to protect recipients from poor financial decisions and ensure long-term security. The insurance company assumes the investment risk, so the recipient does not have to worry about market fluctuations or outliving their funds.

Pros and Cons of Structured Settlements

Benefits: Structured settlements offer predictable, tax-free income, protection from overspending, and the ability to tailor payments to individual needs. They are especially beneficial for minors, individuals with disabilities, or anyone needing long-term care.

• Guaranteed, tax-free payments
• Customizable payment schedules
• Protection from market risk and poor investment choices
• Financial security for the future

Drawbacks: The main drawback is inflexibility. If your financial situation changes, accessing funds ahead of schedule can be challenging. Selling future payments requires court approval and may result in receiving less than the total value of the annuity.

Tax Implications of Structured Settlements

One of the biggest advantages of structured settlements is that payments for personal injury or wrongful death claims are generally tax-free under U.S. law. This means recipients do not pay federal or state income tax on their periodic payments. However, if you sell your future payments for a lump sum, the proceeds may be subject to taxes or fees. It's important to consult a tax professional before making any decisions.

Why Cash Out Your Structured Settlement?

Life is unpredictable. You may face unexpected expenses—medical emergencies, debt, education costs, or investment opportunities. In these situations, waiting years for your payments may not be practical. Selling all or part of your structured settlement can provide the immediate cash you need to take control of your finances.

SmarterPayouts helps you unlock the value of your settlement quickly and securely. Our process is transparent, and our team is dedicated to getting you the best possible offer with no hidden fees or obligations.

How to Sell Your Structured Settlement Payments

1. Get a free, no-obligation quote using our Early Payout Calculator.
2. Review your offer and ask questions—our team is here to help.
3. Complete the paperwork digitally with DocuSign.
4. We handle the court approval process for you.
5. Once approved, receive your cash by direct deposit, check, or in-person delivery.

Learn more about the court approval process and how we make it easy.

Frequently Asked Questions

Are structured settlements safe?
Yes. Payments are funded by highly rated insurance companies and are protected by state and federal regulations.

Can I sell only part of my settlement?
Absolutely. You can sell all or just a portion of your future payments, depending on your needs.

How long does the process take?
Most transactions are completed within 30–45 days, depending on court schedules and documentation.

Will I owe taxes if I sell my payments?
The lump sum you receive may be subject to taxes or fees. Consult a tax professional for advice.

Why choose SmarterPayouts?
We offer transparent quotes, fast service, and a customer-first approach. Our team guides you every step of the way.