Structured Settlement

A structured settlement is used when there is a large amount of money involved in the settlement of an insurance claim for physical injury or wrongful death, a workman's comp claim, or moneys awarded in a lawsuit following physical injury. Lottery winnings are also paid under the same kind of plan, and in all of these cases the purpose of paying the winnings or compensation as a structured settlement is to keep the receiver from having to worry about managing large sums of money all at once. In the case of an injury claim, the defendant pays the amount of the judgment to a third party, such as an insurance company, that puts the money into an annuity or U.S. Treasury bonds. Some of the money is usually paid up front to the claimant for immediate needs, and regular payments made after that. In the case of a lottery winner, instead of receiving payments monthly or annually, that person could choose to have it all invested to be withdrawn upon retirement.

In the case of personal injury cases, the plaintiff and defendant negotiate a settlement with the help of an expert who knows how to calculate the cost of medical care over time, and the needs of the plaintiff's family. The payments are calculated to meet those needs. The structured payment arrangements can be complicated, so the plaintiff should not agree to anything without consulting the attorney who has helped to win the case. Persons left with lifetime or temporary disabilities will have to be especially careful if they cannot work for months, or no longer work at all, to meet the family's needs. It would be a shame to end up with inadequate funds. Receivers of structured settlements have another plus in their favor--there are no taxes on these settlements, so they can count on being able to use all the funds awarded to them. It is in keeping with the Biblical admonition " To do justice and judgment is more acceptable to the LORD than sacrifice." (Proverbs 21:3)

Guardianship cases involving minors or persons declared incompetent are also suited for structured settlements. Guardians have a set amount coming in every month that is sufficient for meeting the needs of their charges, but not enough to waste any of the funds intended for their upkeep. In the case of a wrongful death claim, a structured settlement will provide a monthly income for the surviving spouse and children. If a surviving spouse is already working, they won't be as destitute as the family where the spouse who died was the only breadwinner, but there will still be a large hole in the family bank account without the other spouse's earnings. The purpose of any settlement at all is to pay compensation for a huge loss in a family.

The payments in structured settlements are fixed and determinable as to the amount and timing. The term for payout may be as long as 50 years in some instances, or for life. The payments cannot be deferred, increased, or decreased by the recipient. In fact, the recipient cannot have control over the structured settlement funds at all, once the terms have been determined. Attorney's fees may be paid as part of structured settlements as well, if the lawyer wants it set up that way. Payments can also be deferred for up to twenty years, if the attorney wishes that kind of arrangement.

Should the recipient in a structured agreement decide that a lump sum would be better, there are companies that will purchase the annuity from its holder, and pay the claimant what's left after its fees. If that course of action is decided upon, however, it should be done with considerable caution. The company offering to buy the funds should be carefully checked out through the Better Business Bureau and any referrals that can be found. Also, be sure of exactly what they are charging for fees up front. It would hardly be helpful to end up with serious losses, and some of the offers are nothing more than scams.

For the person who wins the lottery, a structured settlement is the ideal way to manage that kind of money. If the funds are deposited into an annuity, there is a choice of immediately beginning payments, or to defer them to a later date. Either way, the funds are always drawing interest, and the longer they are left alone, the more they grow. If they can be saved for retirement, for instance, and the winner will never have to worry about money again. Actually, with lottery winnings, either way the winner is fixed for life, but there is still the choice one could make. For lesser sums (than lottery), such as an amount awarded for bodily injury from which receivers will recover, the money in structured settlements could be deferred and used for college tuition for children or for the claimant's retirement--thus reaping benefits far into the future.

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