What Is A Structured Settlement?

A structured settlement, sometimes called a "structure", is an agreement in which an injured person agrees to accept a series of payments over time (as opposed to a single lump sum) from a defendant or insurer in return for a release of his or her claim. The name refers to the fact that payments are structured to meet specific needs.

The first payment is typically a check to cover attorney’s fees, liens, and expenses and to establish a cash reserve for the claimant. Future payments are backed by either U.S. Government bonds or annuity contracts from state-regulated life insurance companies*.

A typical structure might look like this:

$350,000 cash at settlement
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$2,000 per month guaranteed for life,
not less than 30 years certain
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$20,000 paid in year 5
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$40,000 paid in year 10
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$60,000 paid in year 15
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$100,000 paid in year 20
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*As required by tax law. See Internal Revenue Code Section 130