Understanding Structured Settlements: A Complete Guide
Everything you need to know about structured settlement payments, tax implications, and legal considerations.
Structured settlements provide a steady stream of income to injury victims and lawsuit winners. Understanding how they work is crucial for anyone involved in personal injury litigation or considering selling their settlement payments.
How Structured Settlements Work
Rather than receiving a lump sum, the plaintiff receives periodic payments over a specified time period. These payments are funded through an annuity purchased by the defendant or their insurance company.
Tax Advantages
One of the most significant benefits of structured settlements is their tax treatment. Payments from physical injury settlements are typically tax-free under current tax law, providing substantial savings compared to lump-sum investments.
Selling Your Settlement
While structured settlements offer security, some recipients need immediate access to funds. Companies that purchase structured settlement payments can provide a lump sum, though typically at a discount to the total value.