What is a structured settlement?

A structured settlement compensates injury victims by way of a voluntary agreement between the defendant and the victim or the victim’s survivors. Payment is not made in one lump sum, rather smaller tax free payments, determined by present and future medical expenses and living expenses. A structured settlement can also be reached privately rather that going to court and incurring additional expenses, of course you would do this with a lawyer versed in the field of accidents. A structured settlement can made if a person is permanently or temporarily disabled. If a minor is involved , a legal guardian would become involved and take charge of decision making. This type of settlement is also used in wrongful death cases, where the survivors can sell a policy, rather than just cash it in, and receive a additional yearly income. And of course, this type of settlement can be used for severe injury cases with long term needs.

Who is eligible for a Structured Settlement?

In most situations, people choose a settlement of some kind because their life circumstances have changed, and financially things have also changed. A person, adult or minor, injured in a accident or a person, adult or child, who is disabled, temporary or permanent due to an accident that happened as a result of negligence would likely consider a structured settlement. The survivors of a person involved in a wrongful death suit can also be eligible. The deceased’s policy can sold for partial payments instead of a lump sum payment from the insurance company. This enables the beneficiary to have an additional income, exempt from taxes, both federal and state, for many years and at times a life time. If a minor, or a person who is incompetent, is to receive the settlement, a guardian would have to be in control of all phases of negotiating and handling the receipts. Structured settlements are available in both small and large cases, the amount of the settlement is not a requirement. It has been proven, by statistics, that a serious injury is best settled with a structured settlement.

What are the benefits of a structural settlement and do I have any flexibility?

There are many advantages of a structural settlement, such as, long term payments creating an long term addition to your income. This can allow an accident victim and his or her family to go forward and get their lives in order with out financial worry. This type of settlement is also free of federal and state taxes. Another benefit of a structural settlement is it’s flexibility. Payments need not be the same amounts, if a disabled person feels he or she will need new equipment every 5 years or whenever, he can ask for a larger payment at that time. Sometimes you have life changes, like a young child that might have been injured before his teen years and when he reaches thirty years of age, no longer has a need for payments and would like to now have a lump sum. At that point, you would speak to your settlement agent to arrange the payoff or to possibly sell part of the settlement.

Why do we have structured payments?

In the early 1980’s congress passed legislation to allow victims of accidental injury or wrongful death, a structured settlement, that would be tax exempt on the payments received. With the enactment of that law, Structured Settlements were soon to become popular for the payment of damages in an injury law suit. Families who find themselves suddenly thrown into a situation of dealing with injury victims were finding themselves in financial difficulties and structural settlements were meant to help these families. Smaller payments, rather than a lump sum, provided additional income for income lost, or helped with medical expenses not covered. The payments are decided according to family needs and the injured victims medical needs. A settlement broker is usually the person who computes these figures. As lives change, so can the structural settlement payments.

Where do my payments come from?

After the structured settlement has been agreed to, the defendant in the case will enter into a contract with the victim and the settlement payment provider, which is a special company connected to a life insurance company. When all agree, the victim, the settlement provider and the defendant, a payment schedule. will drawn up. The provider gets a lump sum payment from the defendant’s insurance and agrees to make the payments according to the schedule. Usually the settlement provider will take the lump sum payment and invest it into an annuity policy from a insurance carrier. The annuity now funds the payment obligations, and is preferred to a trust fund.

How long does the process take?

The entire process, from the time of starting the procedure, to the end when it goes to the court system can take from four weeks to four months. This depends on the court system in your area. Most of the paper work, such as the contract and the underwriting process can be done quickly. If the court calendar is available it could move very quickly. Cambridge Settlements will do their best to move the process efficiently and as quickly as possible. Of course all information is confidential and the clients privacy is of utmost importance. We try to make the stressful procedure as uncomplicated as is reasonably possible.

At any point can I sell my remaining payments?

You can sell your remaining payments, but you must do this through the courts. A judge will need to review your case and decide whether or not a sale is is your best interest, and if so, will give permission. This process from beginning to end, once all necessary forms have been completed, can take up to four to six weeks depending on the courts in your area. You can sell a part of your settlement, and still continue to receive payments on the remaining balance. As with any settlement, changes should be done with an attorney that you are familiar with, perhaps your original attorney. Each state has their own laws governing the sale of these settlements to a third party.