Settlement and Alternative Dispute Resolution
Settlement Structures
A structured settlement funds future payments through an annuity purchased from a life insurance company. Payment streams can be tailored with periodic payments, scheduled lump sums for anticipated expenses, and lifetime benefits.
Payments representing personal physical injury damages generally retain their tax-free character under federal law, including the investment growth.
Alternative Names:
Periodic Payment Settlement, Annuity Settlement
Why it Matters?
Structures are most valuable in catastrophic injury and minor claimant settlements, where lifetime needs and dissipation risk both argue against a lump sum. The tax treatment is the core advantage, since the growth inside the annuity is not taxed when the underlying damages are excludable. The structure must be established at settlement, since a claimant who takes constructive receipt of a lump sum cannot restructure it afterward.
Frequently Confused with
Related terms
Frequently asked questions
Why are structured settlements tax-advantaged?
Can a claimant convert a lump sum into a structure later?
