What Is Structured Settlement?

What is a structured settlement in personal injury law?

A structured settlement is a way of paying a personal injury award over time instead of in one lump sum. The payments are typically funded through an annuity purchased by the defendant or their insurer. Structured settlements can provide steady, predictable income for years or even decades after the injury.

• Periodic payments instead of one lump sum.

   

• Funded by an annuity.

   

• Provides long-term financial stability.

   

• Common in large settlements.

   

When are structured settlements used?

They are often used in cases involving serious injuries, minors, or victims who will need long-term care. They are also common when the settlement amount is large enough to warrant financial planning over time.

• For catastrophic injuries.

   

• When settlement is substantial.

   

• In cases involving minors.

   

• For long-term medical care needs.

   

What are the benefits of a structured settlement?

Structured settlements can help prevent spending the money too quickly, offer tax advantages in many cases, and provide a guaranteed income stream. They can also be tailored to meet future expenses like college tuition or medical care.

• Prevents quick depletion of funds.

   

• May offer tax benefits.

   

• Ensures steady income.

   

• Customizable for future needs.

   

Are there drawbacks to structured settlements?

The main drawback is reduced flexibility — once the payment schedule is set, it’s difficult to change. In addition, inflation may reduce the real value of future payments over time.

• Less financial flexibility.

   

• Inflation can erode purchasing power.

   

• Changes to schedule are rarely allowed.

   

• Not ideal for immediate large expenses.

   

Conclusion:
A structured settlement can provide stability and security after a personal injury, especially for victims with long-term care needs, but it may not suit everyone’s financial goals.