What is a structured settlement?

While the general definition of what is a structured settlement may be easy to outline, there are many different intricacies involved within all of the different types of settlements, so these issues can get fairly tricky and complex in a hurry, which means you should definitely not try to enter this situation on your own, without legal representation. So, we hope that you will be able to gain some valuable insight from this brief outline to help you get started in the right direction and then seek out professional legal aid for when you are completely ready to get started on the actual process.

In its simplest terms, a structured settlement most frequently addresses a financial or insurance arrangement in which periodic payments are established for a claimant to receive in order to resolve a personal injury tort claim. The claimant may also choose to receive these payments as a means to compromise a statutory periodic payment obligation.

One of the most common types of these structured settlements is to receive payments from an insurance provider to pay for a claim registered by the injured party (claimant versus the insurer). Another very common type of structured settlement involves divorce cases, where one party legally requests payment for various reasons (e.g. to maintain accustomed lifestyle, alimony, child support, and division of assets). You might also see these structured settlements at play for an employee versus employer case such as with employer negligence cases or wrongful dismissal where the periodic payments would be set up to account for the employee’s lost earning potential and lost wages.

Structured settlements may include income tax and spendthrift requirements as well as benefits and are considered to be an asset backed security. One of the specific ways that a structured settlement might be created in order to maintain solvency on the party of the guilty or responsible party is through the purchase of one or more annuities. Through the purchase of one or more annuities the claimant is then essentially guaranteed that they will receive future payments to resolve the case. (You might also see the term structured settlement payments frequently used interchangeably with the simple term of periodic payments. In addition, when a structured settlement is being arbitrated in a court process (trial judgment) you will also hear these payments referred to as a periodic payment judgment. Or, you might even hear of them referenced as a coupon for a regular bond in these trial judgment situations.