How does a structured settlement annuity work?

When the defendant and plaintiff agree to resolve a lawsuit with a structured agreement, the parties negotiate a cash amount payable by the defendant in exchange for the plaintiff to withdraw the lawsuit. The money is distributed as a series of periodic payments, usually financed through an annuity.

A Structured Settlement Annuity

(SSA) provides periodic tax-free payments over a period of time, specifically designed to meet the needs of the injured party. Specialized consultants facilitate the liquidation process and help design and negotiate the structure.

American General insurers are market leaders in providing structured settlement annuities to victims of personal injury, physical injury, or physical illness. Structured settlement payments are secured and irrevocable; however, annuity settlement options may differ from typical revenue contracts. Structured settlements can also be designed to increase payments over the years, starting relatively low and ending up. Annuity is an irrevocable flow of regular payments from an insurance company structured in a manner dictated by the court system.

The law served as the federal government's acceptance of the IRS ruling and extended restrictions to state governments, prohibiting them from taxing income from structured settlement of personal injury cases. Some municipalities even have stricter regulations and are generally in areas where there is a larger population at risk with structured settlements. When a plaintiff receives a lump sum settlement, they may spend it too quickly, depriving them of the long-term financial security that future payments could provide. Congress has provided an opportunity for injury victims to receive guaranteed periodic payments as part of their personal injury settlements.

As long as you consider these issues before signing a settlement agreement in your case, you can structure as much or as little as you like and take the rest in cash. Your lawyer is likely to have helpful opinions and will negotiate the terms of the agreement on your behalf. Structured settlements can be sold and there is no established formula or standard for how to sell payments. Periodic income tax-free payments made under these annuities cover future medical expenses and basic living needs, and can last the life of the injury victim and his family.

This flexibility is why many litigants recommend structured settlements to their clients rather than a one-time payment after winning a case. The settlement is then spread out into a series of periodic payments over an agreed period of time rather than a one-time payment in most cases. These have been around for more than a decade and are common in taxable cases, such as employment agreements.