Everything You need To Know About Structured Settlements

Sometimes, in the middle of our hopes and dreams, life hits us hard.  We find ourselves facing situations that are far beyond our endurance capacity, and we’re torn between trying to process what just happened… and trying to make the best out of a terrible situation.


While nothing can rewind the past or erase the pain, sometimes settlements can help the wronged plaintiff with making the best of said situation. Instead of spending days battling in courts and lawsuits, the two parties reach a middle ground of settling. Settlements can be agreed upon to be paid in a lump sum in one go, or as structured settlements to be paid over a longer period of time. But how exactly does that work?

What is a Structured Settlement?

Instead of getting the settlement money in lump sum, the plaintiff can choose the settlement payments to be spread over a period that best fits them.  They can also customize the amount of money to be paid in each payment as best fits their needs.


With the help of a specialized attorney or a lawyer,  you can design the structured settlement and set its terms and conditions, and it can be as flexible as you want to be.  However, after the contract has been signed, it’s almost impossible to change the terms.

How Do They Work?

It starts with both parties, the defendant and the plaintiff, reaching the solution of settlement instead of taking it to the court of law.  Afterwards, they start negotiating the terms of the settlement. In this meeting, they reach an agreement about the schedule of the payments and the amount of money in each payment.


The defendant then signs the contract that binds them to all of the future payments scheduled, and in exchange, the plaintiff agrees to release the defendant of the claim.  A third party (the assignee) is then involved, and takes over the responsibility of getting the payments from the defendant.  The assignee also gets funds to purchase an annuity contract, which holds the payments made by the defendant.  When it’s due time, the assignee may make the payments themselves, or let the annuity issuer make the payment to the plaintiff.


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Cases for Which Structured Settlements Works

Structured settlements usually come to play when the plaintiff receives a lot of money, in which case they are better off with getting periodical payments instead of getting all of the money at once.  After all, if you’ve been wronged in such a way that turns your life upside down such as if you’ve been in a motorcycle accident, then you do have rights to acquire the payments in the best way to ease your suffering.  Such settlements work best for those cases that have gone through a lot of trauma as a result of the tragedy, such as an injured or disabled worker, victims of a medical malpractice, or the relatives of the victim of a wrongful death.


  1. Workers’ Compensation

Workers’ Compensation laws were put in practice to make sure the workers get their full rights.  As a sort of compensation, workers who were injured or disabled as a result of their jobs are awarded a worker’s compensation settlement. The settlement acts as the source of income the worker would be getting had they not gone through the accident, and can go on through their period of recovery.  In cases of complete and permanent disability, the payments can go for a lifetime.


  1. Medical Malpractice

Every now and then, there are negligent doctors who harm patients, intentionally or not.  Patients who have sustained medical harm, or relatives of deceased patients who died on the hands of such doctors, can get structured settlements as a form of compensation, too.  Medical malpractice includes all of the following:

  • Errors in surgery
  • Surgeries that weren’t even needed medically
  • Dismissing patients’ history
  • Failing to identify the symptoms
  • Wrong prescription of drugs
  • Early discharge from the hospital before full recovery
  • Misinterpreting the results of lab reports


  1. Wrongful Death
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Losing a loved one is never easy, it comes with a huge emotional toll.  And if the family has just lost their father and caregiver, they’ve also just lost their source of income.  In these cases, the surviving relatives are awarded a settlement to help take care of their financial situation. Designing a structured settlement is a better option for the surviving members, as it ensures they have a steady income to maintain their previous lifestyle.

Are Structured Settlements Taxable?

When we speak of a worker’s compensation, medical malpractice, or wrongful death settlements, they are 100% tax-free.  This comes as a form of support from the government in understanding the harsh tragedy and accommodations the wronged ones, or their relatives, are forced to go through.  As such, they don’t deal with it as a standard form of income, but rather a way to right the damage done.


There are other structured settlement that are still taxable, however.  These settlements include divorce, liquidation damage, backpay, punitive damage settlements, and lottery payments.  Such settlements are viewed as income by the government and are prone to taxes.

Advantages of a Structured Settlement

While it might feel tempting to get a large amount of money in one go, going for structured settlements is usually the best option for all parties.  That’s because structured settlements have a lot of advantages, such as:


  1. The terms of the contract can be as flexible as you need them to be.  However, once the contract is signed, there is little that can be done to change it.
  2. Structured settlement payments are completely tax-free, expect for the cases mentioned above.
  3. You might lose some of the lump sum to taxes. This isn’t the case with structured payments that come in smaller fractions.
  4. You’ll ensure a steady income for quite the long period of time.  The structured settlement will ensure you have a steady income, the likes of which you had when you were working. In case of wrongful deaths, it will also secure an income stream for the family of the deceased one.
  5. The next of kin will receive the rest of the payments in case of the early departure of the plaintiff.
  6. The payments will usually gain interest over time, making more money.
  7. In the case of an emergency, the plaintiff may sell the annuity contract for its equivalent amount of cash.


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Designing Your Structured Settlement


Designing your structured settlement should be done with care, good planning, and by the help of a specialized lawyer or attorney. There’s nothing that can right the wrong, but at the very least the payments will help with the consequences of the tragedy. After coming to a plan that best fits your needs, you’ll be able to ensure a long period of regular and steady income as you start to get your life together.