Settlement Payment

Structured settlement cases became more popular in the United States during the 1970′s as an alternative to lump sum settlements. The popularity of structured settlement cases steadily increased because a structured settlement cost much less for the insurance company backing the payments. If a settlement is structured, the insurance company can put a small sum of money into the settlement which will fund all of the future structured settlement payments. Additionally, the increased popularity was due to several rulings by the IRS allowing the structured settlement payments to be tax free.

As structured settlements cases increased, insurance companies developed a process to streamline these structures. This process often requires that the periodic payment be created through the purchase of one or more annuities, which guarantee the future payments will be made to the plaintiff. Once one of these annuities is purchased, the plaintiff will receive an annuity contract from the insurance company that will be making their structured payments. The Annuity Contract will outline the insurance company that owns the payments, the insurance company that will be making the payments, your specific annuity contract number and the exact structure of your payments.

The United States has enacted structured settlement laws and regulations at both the federal and state levels. Federal structured settlement laws include sections of the Federal Internal Revenue Code. State structured settlement laws include structured settlement protection statutes. The negative side of structured settlement cases is that once a structured settlement payment plan has been reached it cannot be changed. Often, plaintiff’s financial situations change or they find find themselves needing to make a large purchase, such as a home, car or investment. At this point, the structured settlement payments originally set up are no longer supporting the plaintiff’s financial needs. Plaintiff’s do have the option of selling all or a portion of their structured settlement payments in exchange for a lump sum of cash. Aside from selling their payment, plaintiff’s have very little options when it comes to changing their structured settlement payment plans.