Thu. Jun 1st, 2023

what is an example of a structured settlement

What is an Example of a Structured Settlement?

If you are a victim of personal injury, medical malpractice, or wrongful death, you may be awarded compensation through a structured settlement. This is not a lump sum payment but instead a series of tax-free payments that will be made to you over time.

While a structured settlement is a good choice for some individuals, it can also cause problems. Specifically, some people who receive large amounts of money suddenly may want to spend it on expensive luxuries or questionable investments.


A structured settlement is a form of financial planning that allows plaintiffs to receive periodic payments over a period of years. These payments can be designed to start low and increase over time, or they can be delayed until a specified date such as retirement.

Annuities are a type of structured settlement that is used to provide lifetime income to victims of personal injury lawsuits. They allow victims to receive periodic payments from a life insurance company, with the money accumulating tax-free over the years.

Structured annuities are a preferred settlement payment method for many plaintiffs because they offer both long-term financial security and a tax-free income. They also have the advantage of offering a death benefit, so that payments can pass on to a beneficiary after the settlement owner’s death.

Generally, annuities are not as flexible as other investment options, such as stocks or bonds, because they are locked in for the length of the contract. This can make it difficult to access funds in the case of an emergency, or to place a lump sum payout in other investments that carry higher rates of return.

Annuities also have a drawback called opportunity costs, which means that you will lose out on the potential for returns on your investment in the event of market fluctuations. This is a disadvantage for people who are younger, but it’s less of a problem for older investors or retirees who have longer time horizons and more risk tolerance.

Another drawback of annuities is that you cannot withdraw money without incurring a penalty. This can be especially problematic if you need the funds to pay for medical expenses or other emergencies.

Life insurance

A structured settlement is an alternate method of dispensing compensation for an injured person that involves periodic payments over time. This alternative to a lump sum cash payout provides financial stability and security for injured claimants over the long term.

See also  Structured Settlement Attorney

The settlement amount is credited to a structured settlement company or annuity issuer, which then makes a series of periodic payments over the life of the policy. These payments can be made monthly, yearly or quarterly depending on the needs of the recipient.

Often, this payment method is chosen because the payments are tax-free if certain conditions are met. In addition, structured settlements are ideal for the financially vulnerable who cannot afford a lump-sum payment.

Another benefit of a structured settlement is that it offers greater flexibility than a lump-sum payout because the recipient can tailor payments to their specific needs. This means that an individual can receive large initial payments to cover immediate expenses like overdue bills and mortgages, then spread out smaller payments for longer-term needs such as paying college tuition or purchasing a new car.

It’s also a wise option for parents with children who may not have the income or caregiving skills to support them if they die. This type of life insurance can help make sure their kids can continue to live in the home they’ve grown up in.

Structured settlements are also popular in wrongful death cases, as they provide ongoing income that helps families meet their basic needs. This is especially true for surviving spouses and children, who often have trouble paying their monthly bills because of the loss of their loved one’s income. A structured settlement may also help a family avoid bankruptcy.


What is an example of a structured settlement, such as a Pension?

A pension is a type of financial product that is set up by an employer to pay regular monthly payments to employees after they retire. This is usually a tax-efficient way for people to save money, and the value of these plans can be significant.

If you’re thinking about opening a pension, it’s a good idea to do your research. It’s also a good idea to consult your pension provider and read their terms and conditions.

There are a variety of ways that you can use your pension, including withdrawing it in one lump sum and receiving a monthly payment until you die. However, you should keep in mind that the government limits how much you can withdraw from your pensions each year.

See also  The Structured Settlement Protection Act of Texas

In addition, if you sell your pension, you may lose some of its value or owe taxes and penalties on the amount you take. You should also check with your insurance company to make sure that you’re not paying more in tax than you have to.

A structured settlement can help you avoid this problem. It can be a great way to help you stay on track with your finances, especially when you’re not working.

It’s important to remember that a structured settlement is not for everyone, so be careful when choosing the best option for you. It’s always a good idea to talk to an experienced financial planner before making any decisions regarding your financial situation.

While there are many different types of structured settlements, they are all designed to provide you with a certain amount of income throughout your life. They can be used for a number of purposes, including paying for medical expenses or helping with your retirement.


A stock is a type of financial security that represents fractional ownership in a corporation. Typically, investors in stocks can profit from their investments through either price appreciation or dividend payments.

The value of a company’s stock can vary widely depending on the company’s performance and investor perception. Investing in shares allows you to participate in the growth of companies, and gives you shareholder voting rights on major business decisions.

There are two main types of stocks: common stock and preferred stock. The former is the most common form of investment in the United States, and it offers shareholders partial ownership in a company. However, it comes with a high degree of risk that you might lose all or part of your investment.

Moreover, it’s easy for stock prices to fluctuate widely based on the whims of individual investors. In order to be a profitable investor, it’s crucial to diversify your portfolio with different companies.

Another important aspect of investing is understanding the differences between stocks and bonds. Bonds are similar to stocks in that they represent fractional ownership in a corporation, but they operate more like a loan rather than an equity investment. Unlike stocks, bonds offer investors regular payment in exchange for their capital.

Securities are a broad category of financial instruments that include stocks, bonds, and other financial products. They are regulated by government agencies, and they protect investors from fraudulent practices.

One of the most important things to consider when choosing an investment company for your structured settlement is its financial stability. It is crucial to find an investment company that has a high rating and is backed by a trustworthy entity in the event of an emergency.

See also  Tax Implications of a Structured Settlement


If you have been involved in an accident and have been awarded compensation, you may be offered a structured settlement instead of a lump sum payment. This type of settlement is designed to provide long-term financial security for the injured party or surviving family members.

Unlike a traditional settlement where you receive a lump sum of money, a structured settlement gives you the opportunity to receive tax-free periodic payments over a specified period. This can help pay for medical expenses, lost income, and other costs resulting from the injury.

The amount of money you receive in a structured settlement is typically much larger than a lump sum payment, and you can choose the payment schedule that works best for you. For example, you may want to receive a large initial payment to cover overdue bills and to help you purchase needed items.

These types of payments can also be designed to allow you to receive additional amounts for extraordinary expenses, such as college tuition or medical bills. These extra payments can make a structured settlement more attractive for some people who have not had any other income since the accident and need money to replace their lost wages.

Choosing the right type of structured settlement can be difficult, but an experienced attorney can help you weigh the pros and cons and determine whether or not a structured settlement is a good fit for your case. This is especially true for cases involving serious injuries, such as brain or spinal cord damage or cancer.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.