Structured Settlements 101:
What is a Structured Settlement?

What is a Structured Settlement?

Structured Settlements are an increasingly common way to resolve lawsuits involving large monetary awards.  First established by Congress in 1982, structured settlements are most often used to settle lawsuits involving personal injury, negligence, bias, harassment, workers’ compensation, and class actions, as well as many other kinds of cases.   Structured settlements are also sometimes the outcome of divorce proceedings or the dissolution of a business partnership.

In a nutshell, a structured settlement is an agreement where a defendant (or usually the defendant’s insurance company) agrees to pay an individual a certain amount of money on a certain schedule, as a way of settling a claim.  Ideally, structured settlements provide plaintiffs with long-term financial security, while allowing the insurance companies to pay out big awards over time.  As you’ll see, the reality often falls far short of the ideal. 

If you are currently receiving payments as part of a structured settlement, it’s worth it to take a fresh look at this financial arrangement.  Is the guarantee of a steady stream of future income really in your best interests, especially in light of your present financial needs and goals? Would it be preferable to sell part or all of your future payments for a lump sum cash payment now?  Only you can decide that, but that’s why we’ve prepared Structured Settlements 101, so that you can learn all about these types of financing arrangements and make an informed choice that’s right for you.

If you are thinking of selling all or part of your structured settlement for a lump sum of cash, contact Woodbridge Investments today for a free quote.

How Do Structured Settlements work?

Let’s start with the basics: unlike all-at-once payouts, structured settlements are exactly that, settlements that award money over time according to fixed and settled ground-rules.  This is not necessarily a bad thing.  For the sake of argument, suppose a plaintiff won a million dollars in damages in a personal injury case.  Receiving that award as part of a structured settlement would ensure a steady flow of income in the future and thus theoretically contribute to a plaintiff’s long term financial security.  Moreover, under the current tax code, the payments made as part of structured settlements are not taxable as income.  For many plaintiffs, these are good reasons to accept a structured settlement. 

For defendants and their insurers, the benefits are even more obvious, and they often push for structured settlements out of court in order to avoid the costs and risks associated with litigation.   In our million-dollar example, insurers need not pay out all that cash at once.  They can use a smaller sum to buy an annuity, a secure investment that will grow over time in order to provide the future payments due to the plaintiff.  

Structured Settlements Lock in a Fixed Payment Schedule

In a structured settlement, the parties must agree to a settlement agreement that comprehensively states all the terms of the award, including how much money will be paid, what the schedule of payments will be, and what financial instruments will be acquired by the insurance company in order to meet its obligations to the plaintiff.   This agreement, once entered into by the parties and approved by the court, can not be altered, negated or revised.  Once the structured settlement is agreed upon, it is considered binding and permanent: it generally cannot be changed for any reason, even with a court order in some jurisdictions.

Structured settlements offer a number of advantages to the plaintiff.  A source of income free from Federal and State tax is attractive, and the structuring can be an effective way to ensure that the beneficiary provides for the long term, especially since many people who come into a major award spend that money wastefully.  Moreover, many beneficiaries of structured settlements have suffered life-altering injuries that severely restrict their ability to provide for themselves financially.  A structured settlement for these individuals can ensure that there will always be funds on hand for medical bills and basic living expenses.  

Additionally, to litigate is more expensive for everyone, and thus structured settlements are often favored by plaintiffs and defendants alike, since they can be arranged without litigation.  Attorney costs can be as much as 8% to 10% cheaper for out of court settlements, which can mean huge savings in legal fees.  By holding down these kinds of costs, structured settlements make it easier for insurance companies to consent to larger awards. 

Structured settlements are rigidly “structured,” but they can be set up initially in almost any way that the plaintiff wants.  They can range from a simple yearly payment to complex arrangements consisting of an initial lump sum payment, monthly indexed installments, deferred payments, and special provisions relating to the future care or death of the insured.

Don’t Be Stuck with a Settlement That No Longer Meets Your Needs!

However, all these options must be decided upon ahead of time, once and for all, in the settlement agreement.  These agreements are often made under highly emotional circumstances, while the plaintiff is still struggling to cope with the aftermath of his or her injuries, and while the true picture of long-term financial need is not yet clear.  Yet this is when an agreement must be made to solve not merely the immediate financial needs—which are often made more acute by the legal fees and other costs associated with the lawsuit—but also the financial needs of five, ten, twenty or even fifty years in the future.  Everything must be set in stone at the time of the settlement, and if circumstances change, there is no easy way to alter it—even, in some jurisdictions, if you hire another attorney and go to court. 

But plaintiffs do not have to be stuck with a structured settlement that no longer meets their financial needs.  While you cannot alter the terms of the settlement, you ARE able to sell all or part of your future payments for a lump sum of cash now.   Why cash out?  Maybe your injury has caused unexpected financial hardships that were not taken into account when the settlement agreement was finalized.  Perhaps life changes such as retirement, higher education, a death in the family, or the birth of a child have put you in a position where you need more cash to meet your obligations.  Possibly you suffer from mounting credit card debt or a predatory mortgage and are at risk of losing your home.  It could be an investment opportunity has come along that’s too good to pass up—in all these cases, converting future payments to cash in hand may be the smartest  move you could make. 

All these reasons and more suggest that many recipients of structured settlements would be better off selling their future payments for a lump sum of cash now, which would leave them free to use their wealth as they see fit. 

Find Out How Much Your Future Settlement Payments Are Worth

Woodbridge Investments, the sponsor of the Settlement Source, is a leading financial services firm that offers the highest lump sum payments for all types of future settlement payments.  With Woodbridge Investments, you're guaranteed to receive the highest cash payments for any structured settlement. And if Woodbridge can't beat your offer, they will pay you $500 Cash!  Just fill out our quick and easy form to get a fast free quote. 

If you’d like to find more information on structured settlements, check out the free advice center at www.woodbridgeinvestments.com or call our settlement professionals today!
Call 1-866-865-7044 Today!