What are structured settlements?
• When law suits are settled, damages may be awarded in a lump sum, or a series of payments. A settlement which is awarded in a series of payments over time is called a structured settlement. Structured settlements are generally created by using a third party intermediary to provide the financing.
Many times when individuals are in involved in accidents or wrongful death settlements with insurance companies they elect to receive a series of payments over a longer period of time instead of an immediate lump sum. These payments normally total more than the amount one would have received at settlement. In order to make this election, the Plaintiff must sign a Settlement and Release Agreement that allows the Defendant to purchase an annuity policy to provide for the payments to the Annuitant. The Annuitant does not own the annuity and does not have the right to sell the annuity. He does have the right to receive and sell the payments to a third party.
As we know, America has become a suit-happy society. Over 90 percent of the lawsuits filed every year eventually end in an out-of-court settlement reached between the parties. In the area of personal injury law, where plaintiffs receive monetary awards to compensate them for the injuries they have suffered, structured settlements have become quite popular. Essentially, structured settlements refer to a deferred payment agreement made between the plaintiff and defendant in a personal injury lawsuit where the plaintiff will receive the monetary payout over the course of a number of years. In smaller cases with minimal payouts, structured settlements will rarely be used. Also, when cases are not settled and the lawsuit proceeds to trial, structured settlements rarely come into play as the jury will make a specific award for damages to the plaintiff if the plaintiff is successful with its case. Structured settlements only come into play when the plaintiff and defendant are talking about a
A Structured Settlement is a method of paying damages to a plaintiff (the injured party) over a period of time when a lawsuit has been settled. How Are Structured Settlements Created? A structured settlement most commonly results from a personal injury lawsuit involving: • Product liability • Motor vehicle collisions • Wrongful death • Medical malpractice When the outcome of a lawsuit results in a settlement, the damages awarded are funded in the form of an annuity contract issued by an insurance company. This settlement is structured as follows: • A company (typically an insurance company) is selected by the defendant to structure the settlement. • The structured settlement company purchases an annuity contract and sends the payments from the annuity to the plaintiff. The payments are fixed in time and amount. • The structured settlement company retains ownership of the annuity even though the plaintiff is the beneficiary. Who Can Benefit From the Sale of a Structured Settlement? Each
