What does it mean to structure a settlement?

Structured settlements are periodic payments made to a plaintiff who wins or resolves a personal injury claim. Instead of receiving a lump sum of money for damages, the injured party may receive a series of payments made over time. What is a structured settlement annuity? A structured settlement is defined as a derivative and negotiated agreement of a person or company that wins a civil case. A settlement generally includes a lump sum of cash upfront (cash advance), once, to cover immediate expenses, followed by guaranteed, tax-free, periodic payments customized to meet the needs of the settlement winner.

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. When the defendant and plaintiff agree to settle a lawsuit with a structured agreement, the parties negotiate a cash amount payable by the defendant in exchange for the plaintiff withdrawing the lawsuit. Some municipalities even have stricter regulations and are generally in areas where there is a larger population at risk with structured settlements.

There are 47 states with structured settlement protection laws, created by a model promulgated by the National Conference of Insurance Legislators (NCOIL). The choice is ultimately the plaintiff's, and many consider a structured settlement to be much more beneficial than a lump-sum cash payment. A claimant who has agreed to a negotiated structured settlement chooses to receive part of its settlement money at the time of settlement, and part of its settlement money in the future through a negotiated and customized program of periodic payments that are fixed and determinable in terms of the amount and time of payment. A Medicare structured reserve agreement (MSA) generally costs less than an unstructured MSA due to amortization of future cash flow over the claimant's life expectancy, rather than funding all payments due in the future in a single undiscounted sum today.

Once both parties have agreed on the details of the structured agreement, the plaintiff releases the defendant (or insurer) from liability. A structured agreement can be used in conjunction with settlement planning tools that help preserve the claimant's Medicare benefits. Structured settlements have received strong support from the federal government, as well as plaintiff attorneys, state attorneys general, legislators, judges, disability advocates and many others who have seen their power to protect injury victims from rapidly dissipating or exceeding their incomes, then time in who will no doubt resort to various forms of government or public assistance. American General Life Company insurers are market leaders in drafting structured settlement annuities and have been in business for more than a quarter of a century.

The sale of structured settlement payments for minors is significantly more regulated at the state and federal levels. Structured settlements have been a favorite resolution in personal injury and wrongful death cases for the past three decades. 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. Secondary market annuities occur when a third-party company gives the agreement owner a lump sum of money for payment of the structured settlement.


Minnie Wuestenberg
Minnie Wuestenberg

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