How do you structure a settlement?

When the defendant and plaintiff agree to resolve a lawsuit with a structured agreement, the parties negotiate a cash amount payable by the defendant in exchange for the plaintiff to withdraw the lawsuit. The money is distributed as a series of periodic payments, usually financed through an annuity. Courts use structured settlements in many different types of cases to replace or supplement income that was lost through someone else's fault. Because they are carried out by a third party, it also means that someone does not need to systematically associate with the person or entity that hurt them.

A structured settlement may be advantageous to the plaintiff due to the availability of large sums of money for the trustee of a special needs trust. Structured settlements have been a favorite resolution in personal injury and wrongful death cases for the past three decades. Patty's best course would be to consult someone who knows about structured agreements, special needs trusts, and managing personal injury settlements. This flexibility is why many litigants recommend structured settlements to their clients rather than a one-time payment after winning a case.

The Federal Periodic Payment Settlement Act of 1982 made court approval mandatory for all sales of structured settlements to ensure that the best interest of the consumer comes first and limit any party from taking advantage of the receiver of the settlement. Instead of paying the cash to you or your lawyer, the defendant will send the money for the structure to a subsidiary of the life insurance company called the cession company. New Hampshire, Wisconsin, and the District of Colombia do not have structural agreement protection laws, but homeowners can still sell payments in the state where the insurance company is located. A sound public policy in favor of deterring plaintiffs from squandering their settlements or awards has led to favorable tax rules for structured settlements.

Facing a crisis such as foreclosure or not having transportation to get to a job, many structured settlement owners decide to sell part or all of their payments. The plaintiff can settle the matter for a lump sum and future payments and assign a certain amount of the settlement proceeds to a structured settlement trust. It can be difficult in individual cases to determine whether it is agreed to structure the agreement and it can often happen that professionals' best estimates at the time of liquidation turn out to be incorrect as circumstances develop after the fact. Unfortunately, sometimes those needs change and the structured agreement owner needs access to their money right away.

People who need quick access to funds fixed in a structured settlement turn to buying companies to buy their future payments in exchange for a lump sum. The choice is ultimately up to the plaintiff, and many consider a structured settlement to be much more beneficial than a lump-sum cash payment. A structured settlement is when part or all of the settlement amount is paid to the plaintiff over a period of years.

Minnie Wuestenberg
Minnie Wuestenberg

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