Personal injury plaintiffs who win or settle their cases can often accept their winnings as a one-off lump sum or as a series of payments over a given period. This series of payments is called structured settlement. What is a structured settlement?

Whether you choose a lump sum payment or a structured payment will depend on a number of factors, including your tax liability, the way you spend your money, and whether you need help managing a large sum of money.

How do structured settlements work?

Structured settlement repays the money due from legal settlement through periodic payments in the form of a financial product known as annuity. However, many legal settlements offer a lump sum option that provides a one-time sum of money. The key differences between the two options for settling annuity are long-term collateral and taxes. For example, money received for personal injury is almost always tax free when it is received. However, when the money is yours, you will be subject to taxes and dividends on the lump sum.

Negotiating a structural settlement

The process of settling a civil case by way of a structured settlement includes a person who has been harmed (the plaintiff), a person or company that caused the damage (the defendant), a consultant experienced in such cases (a qualified assignee) and the life of an insurance company.

What is a structured settlement?
unsplash.com

Structured settlement agreement process

The plaintiff sues the defendant for compensation for injuries, illness or death caused by the defendant. Often, the defendant agrees to transfer money to the plaintiff by means of a structured settlement to stop the trial from starting the trial. If the case goes to trial and the judge rules in favor of the plaintiff, the defendant may be forced to make a settlement.

The accused and the plaintiff work with an authorized assignee to determine the terms of the structured settlement agreement – that is, how much regular payments should be, how long they should last, whether they should be increased or supplemented with larger payments times and so on. The defendant provides money to an authorized assignee to buy a pension for the plaintiff.

A qualified assignee buys a pension from a life insurance company by establishing a pension agreement for settlement purposes. After determining the conditions of the pension, they cannot be changed. An immediate lump sum can also be used to cover legal expenses or finance a specific trust.

The life insurance company pays the claimant a number of payments over time, in accordance with the terms of the annuity contract. This pension bears interest in order to protect its value against inflation, and the only reason for which the plaintiff may obtain cash from settlement before the deadline is to sell the right to future payments on the secondary market.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here