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FAQ for Trial Attorneys
  1. Introduction
  2. What is a Structured Settlement?
  3. Advantages to the Plaintiff
  4. Disadvantages to the Plaintiff
  5. Managing the Disadvantages
  6. Appropriate Cases
  7. Inappropriate Cases
  8. Case Size
  9. Why Annuities?
  10. Annuity Pricing
  11. Reduced Life Expect. Discounts
  12. What is an "Assignment"?
  13. Structure of the Deal
  14. Insurance Company Ratings
  15. The Closing Process
  16. What Settlement Brokers Do
  17. How Are SS Brokers Paid?
  18. If the Defense Has Their Own Broker, How will My Broker Be Paid?
Home Page > "How to" For Plaintiff Attorneys >ABC's

How Can a Claimant Manage the Disadvantages?

 Lack of Liquidity

  • Don’t structure the whole settlement. Set aside an amount of cash to provide liquidity for emergencies. Typical cash allocations run from 20% to 40% of the amount remaining after attorney fees, expenses, and liens.

  • Build in future lump sums. The delivery of large single-lump sums every five or 10 years can replenish spent reserves and provide future funds. 

  • In cases of true hardship, emergency funds may be secured in certain cases, subject to court approval.*

 Default Risk

  • Diversify the fixed-income funding sources. Instead of placing the entire structure with one annuity issuer, split it up between two or three. That way, difficulties at one company will not jeopardize all future payments. (This may not be practical for small settlements but should be considered for those over $500,000.) 

  • On newer structures that include a "growth" option (portion of payments tied to performance of an investment fund), diversify between the variable growth and guaranteed fixed options. Unlike fixed payment streams, future payments tied to the performance of an investment fund are held in a “separate account"** for the benefit of the claimant, not as a deposit of the annuity issuer. Since these assets are not assets of the life insurance company, they are therefore unavailable to its creditors. This effectively eliminates default risk for that portion of the structured settlement.

 Limited Investment Choices

  • Work with what you have. The economic advantage of the tax benefit on structured settlements will outweigh its limitations in most cases.


* These so-called “factoring” transactions, while available, can be prohibitively expensive and have been the subject of consumer protection concerns. Although statutes requiring greater disclosure and transparency have been enacted, their strength and effectiveness vary from state to state. Exercise caution when contemplating this option.

**For further details on the separate account request a copy of the prospectus for the associated funding instrument.