Structured Settlement Annuity: What You Need to Know

Ever filed a personal injury lawsuit against a person or a company that caused you temporary or permanent disability? Winning the lawsuit would mean that the party you sued should pay you a lump sum of money as a compensation for the injury you incurred. A better and more sensible option is to reach an agreement called the structured settlement.

What is a structured settlement?


Simply put, a structured settlement or annuity payment pays you a certain amount in installments over time. As a result, you get a constant stream of income from these payments in the long term.

Usually, defendants buy an annuity from an insurance firm for every amount that is supposed to be paid. The structured settlement annuity gives you regular payments, the amount of which is specified by you and your lawyer as agreed by both parties (you as the plaintiff and the company as the defendant) under the structured settlement terms.

In a structured settlement, the documents that have to be accomplished consist of an agreement between the two parties, an application for annuity, a court order (if the personal injury claim is made by a minor), and an annuity policy. In most states, hiring a lawyer is necessary before an individual can get a structured settlement annuity.

How are payments made?


Regular payments are structured according to your needs. The payments can be given in equal installments every year. In some cases, structured settlements are paid initially as a lump sum of cash and then followed by monthly installments. The payments can also include deferred payments and certain agreements regarding the future hospital bills or other medical expenses of the injured person.

The structured settlement annuity payments are tax-exempt, meaning no taxes are deducted from the payments you receive. For the structured settlement payments to remain tax-free, the structure of payments under the terms of the structured settlement should not be changed.