How Structured Settlements Work

A lump-sum payment is generally preferred to a structured settlement in an injury case, but there are some exceptions.

The majority of settlements made in personal injury cases are considered “lump-sum” payments which means that you will receive one payment that settles the case. However, in some cases, some plaintiffs opt to have their settlement paid out over a period of years, called a structured settlement. Continue reading to learn more about how structured settlements work.

How Does a Structured Settlement Work?

Structured settlements became popular in the 1980s after Congress passed the Periodic Payment Settlement Act into law in 1982. According to the National Structured Settlements Trade Association, almost $6 billion in new structured settlements are issued annually.

If you and the defendant in the personal injury case agree to a structured settlement, the defendant or their insurance company will transfer part of the settlement to a life insurance company that specializes in handling structured settlements or annuities. There is a slight element of risk when choosing a structured settlement because if the company that pays out the money over the years files bankruptcy, your settlement is gone.

Settlement Negotiation is Key

Negotiation is a common element to a structured settlement, including the negotiation of terms such as:

The length of the structure
How often you receive money (once a year, twice a year, monthly, etc.)
How much money is included in each payment
Whether you want a lump-sum payment at the end of the structure
Whether you want the payments to end if you die before the end of the structure, or continue to heirs.

While some structured settlements might only last a few years, some can be paid out over a lifetime.

A structured settlement is a regular stream of tax-free payments granted to the plaintiff in a personal injury lawsuit. Structured settlements can provide long-term financial security to the injured party.

At Mickey Keenan P.A. we will guide you through the personal injury settlement process and relieve you of the legal burdens so you can focus on what matters most—you and your recovery.

Advantages of a Structured Settlement

While a lump-sum payment is a traditional way to settle a case, if you are settling a larger case there are a couple of reasons why a structured settlement might be in your best interest.

First, a structured settlement guarantees that you won’t spend the settlement money too fast. Unfortunately, many personal injury plaintiffs who receive large windfalls after a personal injury case blow through the money in a very short time, and then have nothing left.

Second, a structured settlement will save you money on your taxes. While the money that you receive from a personal injury settlement is generally not taxable, you do have to pay taxes on the interest and dividends that you receive if you invest the settlement money. Depending on the size of your settlement payout, that can be a large tax payment every year. With a structured settlement, you will have less money sitting in the bank, and thus a lower tax obligation come tax season.

Depending on the particulars of the personal injury case, a lump-sum payment may be combined with a structured settlement to meet immediate expenses incurred from the injury such as medical bills, rehabilitation, the repayment of debt, etc.

Lump-Sum Payments Most people want to get the settlement over with after a personal injury case. You receive a check, cash it, and the case is over. A lump-sum settlement should be chosen for all small settlements or medium-sized settlements such as those that are less than $150,000.

Not sure what settlement is right for you? Call Mickey Keenan P.A. at 813-871-1300 to speak with our expert personal injury attorneys. We can help you decide which settlement is in your best interest.

Cases That May Result in A Structured Settlement

Severe Personal Injury The more serious the injury is, the more likely a structured settlement will be awarded instead of one lump-sum payment.

Worker’s Compensation Cases If you have been hurt on the job, a court will likely award you a structured settlement depending on the severity of the damages.

Wrongful Death When it is decided that someone is at fault for wrongful death, the surviving family members of the victim are often awarded a structured settlement instead of a lump sum.

Medical Malpractice A structured settlement may be awarded in a medical malpractice case depending on the damages caused.

Injured? See if a Structured Settlement is Right for You

For some personal injury cases, a structured settlement may be a faster and less stressful alternative to trial. Our experienced personal injury attorneys at Mickey Keenan P.A. can discuss the particulars of your case and help you decide whether a structured settlement would be in your best interest.

Call 813-871-1300 for a free consultation with our Tampa, FL-based lawyers. Don’t just accept the first release from your insurance company, you need to know your full damages first to make it right again. At our law firm, we’ll always treat you like family – because to us you are.