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What Is a Structured Settlement?

Structured settlements* are an innovative and proven method of compensating injury victims in legal settlements. Encouraged by the U.S. Congress since 1982, a structured settlement is a voluntary agreement between the injury victim and the defendant.

A structured settlement is a stream of periodic payments paid to an injured party by the defendant primarily through the purchase of annuity (fixed and determinable) issued directly by highly rated life insurance companies. Other funding options include the purchase of United States Treasuries or more rarely, the defendant has the option to self-fund the periodic payments.  Structured settlements provide victims of physical injury and wrongful death lawsuits security and guaranteed long-term income tax-free payments. U.S Congress enacted the Periodic Payment Settlement Act of 1982 (Public Law 97-473), which formally recognized and encouraged the use of structured settlements in tort physical injury cases.

  • Structured Settlements funded by annuities and all structured settlement brokers are regulated by the state insurance commissions.  Additionally, structured settlement consultants and the companies that provide them comply with at least seven Sections of the U.S. Tax Code that pertain to structured settlements (Section 104(a)(1), 104(a)(2) and 130. 451, 461(h), 83 and 5891), not to mention several doctrines not codified such as cash equivalency and economic benefit.
  • Structured Settlement consultants provide services to the defendants and their counsel, plaintiff attorneys and the injured parties and their families throughout the entire settlement process in order to determine the needs of the injured victims and, if appropriate, the proper amount to place into a structured settlement.

For over 35 years, the federal government has encouraged injury victims and their dependents to use structured settlements by means of favorable tax rules for injury victims. Structured settlements have also attracted strong support from plaintiff attorneys, state attorneys general, legislators, judges, and disability advocates.

If you would like additional information about structured settlements, please contact a Ringler consultant located near you.

* Description courtesy of the National Structured Settlement Trade Association