Structured settlement

A structured settlement is a financial or insurance arrangement, defined by Internal Revenue Code as periodic payments; a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada after a settlement for children affected by Thalidomide.[citation needed] Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sum settlements. The increased popularity was also due to several rulings by the IRS and an increase in personal injury awards. The IRS rulings changed policies such that if the requirements were met then claimants could have federal income tax waived.

Structured settlements have become part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Structured settlements may include income tax and spendthrift requirements as well as benefits and are considered to be an asset-backed security. Often the periodic payment will be created through the purchase of one or more annuities, which guarantee the future payments. Structured settlement payments are sometimes called “periodic payments” and when incorporated into a trial judgment is called a “periodic payment judgment." These payments are also called a coupon for a regular bond.

Structured Settlements in the United States

The United States has enacted structured settlement laws and regulations at both the federal and state levels. Federal structured settlement laws include sections of the (federal) Internal Revenue Code. State structured settlement laws include structured settlement protection statutes and periodic payment of judgment statutes. Forty-seven of the states have structured settlement protection acts created using a model promulgated by the National Conference of Insurance Legislations ("NCOIL"). Of the 47 states, 37 are based in whole or in part on the NCOIL model act. Medicaid and Medicare laws and regulations affect structured settlements. To preserve a claimant’s Medicare and Medicaid benefits, structured settlement payments may be incorporated into “Medicare Set Aside Arrangements” “Special Needs Trusts."

Structured settlements have been endorsed by many of the nation's largest disability rights organizations, including the American Association of People with Disabilities and the National Organization on Disability.

[tammyN]

What's good in structured settlement is that you are guaranteed a source in income for life. Another is that you may be able to substantially reduce the taxes you would have to pay on any investment income. They are simply a device to allow for payment of your judgment or settlement over time or on an installment basis. They are flexible and can be structured to meet many needs and life circumstances. Getting the judgment money from a lawsuit can feel like the conclusion of a long process. The Internal Revenue Service, however, could need a portion of that judgment.

[kudometrics]

A structured settlement is really a financial or insurance arrangement, based on Internal Revenue Code as periodic obligations a claimant accepts to solve an individual injuries tort claim in order to compromise a legal periodic payment obligation. Structured settlements were first found in Canada following a settlement for kids impacted by Thalidomide. Structured settlement cases grew to become popular within the U.S. States throughout the seventies instead of lump sum payment pay outs. The elevated recognition seemed to be because of several rulings through the IRS and a rise in personal injuries honours. The Government rulings transformed guidelines so that when the needs were met then litigants might have federal tax waived.

[kudometrics]

Tammy you are right. Structured settlements are guaranteed sources of income and they can't be included in taxes. That's the reason most settlements these days for personal injury cases are done as structured settlements.

Hi if want to sell you structured settlements you can opt for US Settlement Funding.

U.S. Settlement Funding can help by providing you with a large lump sum of cash today for your structured settlement annuity payments. U.S. Settlement Funding is a company that people can depend on and trust for advice when selling structured settlement annuity payments. We can help you obtain the most money for your structured settlement payments now, when you need it the most.

[5to8percent]

There are many places to buy and sell structured settlements. Shop around for the best deal; you don't want to be shortchanged on possibly your only source of income.

[NeilHalsted]

A Structured Settlement Annuity- what we call ‘Secondary Market Annuities’- is a payment stream payable to an injured party in a lawsuit, claim, or injury case. Structured settlements have been used for many years in the legal profession to make awards to injured parties over time instead of in a lump sum. Horror stories abound of lottery and settlement winners dissipating their windfall in just a few years and ending up on public support like Welfare. To combat this, the IRS has made structured settlement annuity payments tax free in most cases, to encourage injured parties to take payments over time.

(click the link on my profile for more info)

[darkLeits]

Buying and especially selling a structured settlement is not an easy decision to make... most companies charge steep rates, and legal fees are charged for this. The best way is to ask around with as many different companies as you can for what they're prepared to offer you for your settlement. Or if you don't have time and don't want too many annoying phone calls, you can try a marketplace service that contacts the companies for you. The best I've seen so far is Structured Settlement Quotes... it has all the information you would need when deciding to cash in your settlement for a lump sum.

[chopkins]

There's some good info to learn more on structured settlements here.

It's interesting how they're set up and offer tax advantages. Companies like JG Wentworth (see their ads?) and My Structured Settlement Cash and Woodbridge are examples for those looking. If you're looking to sell, it's very important to educate yourself before talking to any company. And to understand that those buying a settlement offer a portion of the face value as they must sit on it for the length of the term to get their investment. It's often near half, give or take a bit, in exchange for a lump sum. It should be noted that your case to sell a structured settlement needs to be presented before a judge. While things like a down payment on a home, medical expenses, or even starting a business will be considered, certain luxuries like a new entertainment system will not. There needs to be a good reason to do so. Speaking with a company like those mentioned above will help determine if its feasible.

[helpingout]

Originally Posted by tammyN What's good in structured settlement is that you are guaranteed a source in income for life. Another is that you may be able to substantially reduce the taxes you would have to pay on any investment income. They are simply a device to allow for payment of your judgment or settlement over time or on an installment basis. They are flexible and can be structured to meet many needs and life circumstances. Getting the judgment money from a lawsuit can feel like the conclusion of a long process. The Internal Revenue Service, however, could need a portion of that judgment.

Tammy while you may be correct about initially saying that the payments are guaranteed there are a lot of drawbacks and contigencies. For example there may very well be a case or scenario in which payments are life contingent. If that is the case and the annuitant receiver becomes sick than they very well may lose out on the money that the family could use after one dies.

If however they take out a lump sum payment they can than prevent that issue from arising and affecting the family.

I could go and try to explain the tax situation but I think this publication explains it better than I will:

http://einsteinstructuredsettlements.com/taxes-on-structured-settlement-annuity.html

Like anything else do your diligence and prepare for the unexpected.