Structured Settlement Explained

A structured settlement is a periodic payment plan that is agreed upon between a plaintiff and defendant. It is used in many cases where the plaintiff is awarded a large sum of money.

Instead of receiving the compensation in a lump sum payment, the payments are spread out over a period of time that is decided upon beforehand.

In cases involving personal injury, a structured settlement is especially helpful. If the plaintiff is temporarily or permanently unable to work, a structured settlement provides them with a sense of financial security. The claimant will have a steady source of income which makes financial planning much easier.

Another good reason for choosing a structured settlement is the tax benefits they have to offer. When payment is received through a structured settlement fixed annuity, the claimant’s payments are not subject to federal income tax.

The earnings accrued from the payments are also exempt from federal income taxes. In most instances, the claimant can earn more money this way than through taxable investments.