Why Were Structured Settlements Created?
Historically, damages paid because of an injury lawsuit came in the form of a single lump sum. This kind of payment, especially in catastrophic injury cases, often placed the injury victim (or family) in a difficult financial position: With the victim focused on adapting to a new lifestyle, there often was not the time or expertise to manage large sums of money. This kind of scenario sets up the probability of dissipation. A person who dissipating funds intended to cover a lifetime of medical care runs the risk of losing medical care and independence. They also risk winding up on public assistance at a significant cost to the taxpayer. In 1982, a bipartisan coalition of legislators in Congress came together to pass legislation that amended the federal tax code. Their action, The Periodic Payment Settlement Act of 1982 (Public Law 97-473), formally recognized and encouraged the use of structured settlements in physical injury cases.
