|
Structured Settlement World
News
|
Structured Settlements
What is a Structured
Settlement?
A
structured settlement is a voluntary agreement between a plaintiff
and a defendant under which the injured victim (plaintiff) receives
damages in the form of a stream of periodic payments purchased for
the plaintiff by the defendant.
When should someone consider a Structured
Settlement?
In situations including;
- Personal, Physical Injury or Physical Sickness (auto
accidents, slip and fall claims, bodily injury, physical injury,
medical malpractice etc.)
- Workers Compensation (physical injuries received in the
course and scope of employment)
- Environmental Claims (such as clean-up of toxic waste and
pollution)
Can a plaintiff purchase a structured settlement
annuity himself or herself and still qualify for a tax-free benefit
on the earnings?
No, If the settlement dollars are invested by the claimant, the
interest earned will be subject to tax.
Federal tax treatment of structured settlements are
governed by the Internal Revenue Code of 1986, as amended (IRC). In
particular IRC Section 104(a)(2) provides that compensation received
on account of personal injury or physical sickness is not includable
in gross income, whether received in a lump sum or as periodic
payments.
How might a potential recipient of a structured
settlement protect himself or herself from the effects of inflation?
One
method is to build into the structured settlement payment schedule
either periodic stepped increases for ongoing monthly payments or
special lump sum future payments to help offset any inflationary
effects.
Are structured settlement annuities widely
available through most financial planners and life insurance agents?
No,
because of the specialized nature of structured settlements and
their unique design and focus, only a licensed and appointed
structured settlement specialist can handle this type of
transaction.
Who wins with a structured settlement?
Both
the plaintiff and defendant win. Each can benefit from the use of a
structured settlement.
The plaintiff is provided with payment stability
from a steady, low-risk source of money which is less prone to the
risk of mismanagement or depletion. In addition the settlement
benefits can be maximized through the tax-free status which the
fixed annuity principal and growth may enjoy.
The defendant is provided a means of expediting the settlement
process, that can help reduce litigation costs. Transferring of
responsibility for future payments can also help remove such claim
liability from the corporate books.