Understanding Structured Settlements
A structured settlement is a financial arrangement where you receive periodic payments over time instead of a single lump sum, typically resulting from a personal injury lawsuit, workers' compensation claim, or insurance settlement. These payments are designed to provide long-term financial security and are protected by federal and state laws.
✅ Key Benefits of Structured Settlements
- Tax-Free Payments: Under IRC Section 104(a)(2), payments for physical injury or sickness are excluded from federal income tax
- Court-Approved Security: Payments are guaranteed by highly-rated insurance companies with A- or better A.M. Best ratings
- Customized Schedule: Payment plans tailored to your specific needs and life circumstances
- Protected from Market Volatility: Payments are unaffected by stock market fluctuations or economic downturns
- Creditor Protection: In many states, structured settlement payments are protected from creditors and lawsuits
How Structured Settlements Work
When you receive a structured settlement, your settlement amount is converted into a series of guaranteed payments funded through an annuity. Here's how the process works:
Settlement Agreement
After resolving your case, you and the defendant agree to a structured settlement instead of a lump sum payment. This is typically recommended by attorneys for large settlements.
Annuity Purchase
The defendant (or their insurance company) purchases an annuity from a highly-rated life insurance company. This annuity becomes the funding source for your payments.
Payment Schedule Design
Your payment schedule is customized based on your needs. You can choose monthly, quarterly, annual payments, or a combination. You can also schedule lump sums for specific future dates (college, retirement, etc.).
Guaranteed Payments Begin
Once the annuity is in place, you begin receiving tax-free payments according to your agreed-upon schedule. These payments continue regardless of market conditions.
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Structured settlements can be customized to meet your specific financial needs:
Monthly Payments
Regular income for living expenses and bills
Annual Payments
Larger payments once per year for major expenses
Lump Sum + Payments
Immediate cash plus future periodic payments
Future Lump Sums
Scheduled payments for college, retirement, etc.
Life Contingent
Payments continue for your entire lifetime
Period Certain
Fixed payments for a specified number of years
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How to Sell Your Structured Settlement
Step-by-step guide to selling your structured settlement payments legally and safely.
Read GuideState Laws & Requirements
Review structured settlement laws and court approval requirements in your state.
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