How Do Structured Settlements Work?
A structured settlement pays out money owed from a legal settlement through periodic payments in the form of a financial product known as an annuity. However, many legal settlements offer a lump-sum payment option, which provides a one-time sum of money. The key differences between both annuity settlement options are the long-term security and the taxes. For example, money received from a personal injury case is almost always tax free when you receive it. However, once the money is yours, you’re liable for taxes and dividends from the lump sum.
There are a number of reasons why an individual may receive a structured settlement.
The most common cases are:
Personal Injury
A personal injury case is a civil case where someone who’s been harmed files a lawsuit seeking money from the person believed responsible for the harm. Money in the form of a structured settlement helps recipient pay for medical expenses or other costs.
Workers’ Compensation
Most people know about workers’ compensation, which pays workers who get injured on the job while they recover. Payments can be used for medical treatment and wage replacement during periods when injured employees are unable to work and other expenses.
Medical Malpractice
In some unfortunate cases, doctors can do more harm than good. In this instance, injured patients or the families of deceased patients can sue for medical malpractice.
Wrongful Death
A structured settlement is also a common way to compensate family members who claim loved ones were victims of wrongful deaths. Families may be entitled to receive a stream of tax-free payments, to replace income after a loved one’s death.
Structured settlements — or structured annuities — are both financial products and legal judgments. While they function somewhat like private assets, they are also subject to complex regulations.
Learn about the process of being awarded a structured settlement annuity as well as the legal protections and advantages on the following pages:
Structured Settlement Payout Options
Compare and contrast the different ways to accept a cash settlement from a lawsuit.
Government Support for Structured Settlements
Learn about how the government uses the tax code to promote their use.
Structured Settlements for Minors
Read about why this type of settlement is typically used in cases involving children.
source : https://www.annuity.org/
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