Structured Settlements

A structured settlement is a financial or insurance, including periodic payments to a claimant accepts to resolve a personal injury claim or to compromise a statutory periodic payment obligation. Structured settlements were first used in Canada and the United States during the 1970s as an alternative to lump sum settlements. Structured settlements are now part of the statutory tort law of several common law countries, including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries have their own definitions, rules and standards for settlement. Structured settlements may include income tax and spendthrift requirements as well as benefits. Structured settlement payments are sometimes called "periodic payments". A structured settlement incorporated in a decision of the trial is called a "conviction periodic payment."

Structured Settlements in the United States

The United States has enacted structured settlement and regulations, both federal and state law. Federal laws include structured settlement section of the federal Internal Revenue Code. State laws are structured settlement protection laws structured settlement and the periodic payment of judgments law. The Medicaid and Medicare laws and regulations impact structured. To preserve the benefits of Medicare and Medicaid provider, structured settlement payments can be incorporated into "Medicare set aside arrangement" of "Special Needs Trust."


The U.S. definition of "structured settlement" for purposes of federal tax receipts, the section of the Internal Revenue Code 5891 (c) (1), is an "arrangement" that meets the following requirements:

A structured settlement must be established by:

Costume, or the periodic payment of damages excludable from gross income under Internal Revenue Code Section 104 (a) (2), or

An agreement for the periodic payment of compensation under workers' compensation law may be excluded under the Internal Revenue Code § 104 (a) (1), and

Periodic payments must be of the nature described in paragraphs (a) and (B) of the section of the Internal Revenue Code 130 (c) (2) and paid by a person who:

There's a party dress or a contract or a claim for workers' or

For a person who has assumed responsibility for the periodic payments under a qualified assignment section 130 of the Internal Revenue Code.

Legal Structure

Structured type regulation comes and is structured as follows: An injured party (plaintiff) establishes a civil liability suit with the defendant (or his insurer) under an agreement which provides that in exchange for the applicant to ensure the rejection trial, the defendant (or, more commonly, the insurance company) agrees to a series of periodic payments over time. The insurer, an insurance company property / casualty, hence the obligation to pay long term for the applicant. To fund this obligation, the insurance company property / casualty usually takes one of two typical ways: either purchase an annuity from a life insurance company (an arrangement called "buy and hold" case) or assigned ( or, more precisely, delegates) its periodic payment obligation to a third party that purchases an annuity in turn (called a settlement of cases "assigned").

In a case not assigned, owned by the insurance company / victim retains the obligation to pay periodic finance the purchase of an annuity from a life insurance company, thereby offsetting its obligation with a set of assets. The payment stream purchased under the annuity is right on the timing and amounts, the periodic payments specified in the agreement. The real estate company / victim of the annuity and names the claimant as a beneficiary of the annuity, so that the direction of the annuity issuer to send payments directly to the applicant. If one of the periodic payments are contingent life (for example, the payment obligation is conditioned on a person who is alive), then the plaintiff (or the person who is determined to be the measuring life) is named as the life or retired in the measurement of the annuity.

In the case of specified property / victim does not want the company to maintain long-term periodic payment obligation on its books. Thus, the property / victim of an insurer to transfer the obligation, through a device called a qualified legal position, to third parties. A third part, called the company's mission, in respect of the property / company to pay the victim the sum of money sufficient to enable him to purchase the annuity, which is funded by the recently approved for the periodic payment obligation. If the applicant agrees to the transfer of the periodic payment obligation (either in the settlement project, or otherwise qualified in a particular task is known as a valid function, and release), the defendant and / or properties / victim, the company also has no liability to make recurring payments. This method is desirable obliger refund for the goods / victim companies, who do not want to keep the periodic payment obligation to his books.

Generally, an employment is a subsidiary of the life insurance company whose income is purchased.

A task is said to be "qualified" if it meets the criteria of the Internal Revenue Code § 130th Qualification of the assignment is important for companies to trust because without it the amount they have to make them accept payment obligations period would be considered income for federal income tax. If a job meets the requirements of § 130, however, is the amount received is excluded from the income of the trust company. This provision of the tax code was enacted to encourage assigned cases, without it, companies must have the task of federal income taxes but do not usually source from which to make payments.see more


2 Respones to "Structured Settlements"

structured settlement said...

There are so many important facts about the legal side of structured settlement in this article.Very informative.

September 20, 2011 at 7:51 PM
mike said...

This article was very informative. I was I came across this article before I decided on my settlement payments.

November 10, 2011 at 3:15 AM

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