What Is A Structured Settlement
Preferred Settlements, Inc.

What Is A Structured Settlement

Historically, money paid because of a personal injury law suit has been paid in the form of a lump sum at the time of settlement. This kind of payment, especially in very large catatropic injury cases, places the claimant (or the family) in the position of managing a large sum of money often is spent quickly, leaving little or nothing to cover future needs of a seriously injured person. In order to create a more stale financial basis the claimant, structured settlements were developed.

These arrangements may be voluntary, as in a pre-trial settlement, or they may e required by law or a court order, as in a settleent involving a minor. The defendant may agree to make furture payments or in any purchase an annuity cotract for a life insurance coampany to fund the payments. Annuity contracts have been preferred a of funding because of their pricing and fexibility for settlement design. An alternative, however, is a trust fund which invests only in the United States treasury obligations. These trusts add safety of investment in obligations issued by the U.S. Government.

By definition, a Structured Settlement is the pyament of money for a personal injury clain where at least part of the settlement calls for furture payment. The payments may be scheduled for any length of time -even as long as the claimant's lifetime, and may consist of installment apyments and/or future lump sums. Payments can be in fixed amounts or the can vary. The schedule is structured to meet the financial needs of the claimant.

There are som important benefits to the claimant in structureing the settlement:

  1. The claimant recieves money when it is needed. Instead of receiving a lump sum which has to be invested at risk, and manaed for a fee, the money is paid out over time, better correlated with the actual need for funds.
  2. The claimant does not have to pay income tax on the payments received, which includes an internal buildup of funds over time. A lump sum received also would be tax-tree, but most later income from investing that meony would be taxable.

Preferred Structured Settlements

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