A structured settlement is simply a future periodic payment arrangement that is made a part of a personal injury settlement. Under Section 104(a)(2) of the Internal Revenue Code, all of the future periodic payments are completely tax-free to the injury victim even though the payments include interest they earn. The structured settlement is spendthrift as it can’t be accelerated, invaded or sold. Fixed annuities are used as the funding mechanism for a structured settlement. These annuities are offered by large well capitalized life insurance companies. Annuities are used because of their flexibility and because many different payments options are available for the injury victim to meet their needs.
While the transaction and the concept might seem very simple, there are many issues that trial lawyers should be aware of as well as concerned about. If you review the sections in this part of the site it will give you a good idea of the issues and also why it is important to have your own settlement planner looking out for these issues.