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FAQ for Claim Professionals
  1. Introduction
  2. What is a Structured Settlement?
  3. Why would a claimant want one?
  4. Why wouldn't they want one?
  5. How can the claimant manage the disadvantages?
  6. Why does my company want me to use them?
  7. Which kinds of cases are good candidates for structures?
  8. Which cases are not?
  9. What about case size?
  10. How do I get started?
  11. What's a typical negotiating scenario?
  12. What if the Claimant says no?
  13. Approved annuity issuers
  14. Why annuities?
  15. Annuity Pricing
  16. Reduced life expectancy discounts
  17. What is an "assignment"?
  18. Structure of the deal
  19. Insurance company ratings
  20. The closing process
  21. What do settlement brokers do?
  22. How are brokers paid?
  23. What if the claimant has their own broker?
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Why Wouldn't A Claimant Want One?

Structured Settlement Disadvantages

Choosing a structured settlement does involve certain trade-offs:

  • Lack of Liquidity Once a structured settlement is established, claimants have no direct access to the funds. Assets intended to fund future payments will not belong to them, nor can they cash them in. Insulation from ownership of the assets is what makes the structured payments tax-free: the claimant must avoid “constructive receipt” or “economic benefit” of the funds in order to qualify for the tax advantages available under current Internal Revenue Code rules.

  • Default Risk This is the risk that the party responsible for future payments will not pay on time or in full. Although default risk is not unique to structured settlements, their extra-long duration (many lasting 30, 40 or even 50 years into the future) makes management of this risk a priority.

  • Limited Investment Choices Tax rules limit the universe of investment classes available for funding most structured settlements to two: government bonds and annuities purchased from state-regulated life insurance companies.*

*See IRC Section 130.