Lump Sum Cash

Structured Settlement Payments.

What is a Structured Settlement?

A Structured Settlement is an Agreement for one party, typically an Insurance Company, to pay another party, some future disclosed amount of cash
Results from some form of accident

If you have a structured settlement, receive payments from a structured settlement, or are about to receive a structured settlement, this page will be a valuable resource to understand the creation and purpose of a structured settlement. Most structured settlements are paid out over time via an annuity offering future payments. You should know that if you are receiving payments from a structured settlement, you have the right to turn those future annuity payments into cash now.

Why is it necessary and how does it work?

Historically, damages paid because of a personal injury lawsuit came in the form of a lump sum at the time of settlement or judgment. This kind of payment, especially in large catastrophic injury cases, places the claimant (or the family) in the position of managing a large sum of money, which is intended to provide for a lifetime of medical, and income needs.

Since most people are not experienced in handling large sums, there is always the danger that the money will be spent quickly or invested unwisely, leaving little or nothing to cover future needs of a seriously injured person. Indeed, anecdotal evidence suggests that many claimants who receive lump sum awards dissipate their assets and are left with unmet needs within a relatively short period of time.

Thus, structured settlements were developed to create a more stable financial basis for the claimant.

How does it work?

The defendant agrees with the victim on a stream of periodic damage payments tailored to the victim's particular medical care and basic living and family needs. The defendant then assigns its periodic payment obligation to a life insurance company, which funds the victim's damage payments with an annuity. In some instances, the defendant retains the periodic payment liability and purchases as annuity to fund the payments to the victim.

Annuity contracts have been the preferred way of funding because of their pricing and flexibility for settlement design. An alternative is a trust fund, which invests only in United States Treasury obligations. These trusts add the safety of investment in obligations issued by the U.S. Government.