Q: What is a structured settlement?

A: A structured settlement is a way to settle a personal injury claim or payment obligation in which the claimant receives periodic settlement payments for a length of time in the future. Typically, these payments are set up to be tax-free or tax advantaged.

Q: Should I consider a structured settlement?

A: You should consider a structured settlement in the following cases:

• Severe injury cases where the claimant needs regular income for medical care, living expenses, and family support
• Wrongful death cases where the surviving family members need regular income
• Cases involving temporary or permanent disability
• Cases involving minor or incompetent persons and their guardians

Q: How are structured settlements set up?

A: An insurance company is usually responsible for structured settlement payments. They may provide the payments themselves, or purchase a life insurance annuity to cover the payments.

Q: What is an annuity?

A: An annuity is an agreement set up with a life insurance company. They receive a sum of immediate cash, and guarantee to make future periodic payments.

Q: What happens to the payments if the claimant dies before the last payments are made?

A: Structured settlement payments are made to a beneficiary named by the claimant at the time the settlement is finalized. If nobody was chosen, the payments will go to the claimant’s estate or other heirs to be determined after the claimant dies. The claimant may choose a lump sum payment, or may choose to sell his or her structured settlement for a lump sum if simplified estate planning is desired.

Q: Why choose a structured settlement over other investment vehicles, such as mutual funds?

A: If the claimant has the necessary degree of risk tolerance, fiscal discipline, and a long-term time horizon in which to invest, mutual funds may be a more appropriate vehicle. If the claimant lacks the discipline necessary, has shorter-term needs, or wishes to avoid the risk of investing at an inopportune time, then structured settlement payments may be more appropriate.

Q: I need extra cash for an emergency – can I sell just a part of my structured settlement payments now?

A: You typically have the option of selling your entire annuity, or just a part of it. For example, a judge will be likely to approve of you getting cash from your structured settlements to avoid a foreclosure. Make sure you are really using it for an emergency, and are not just spending the money unwisely. Each time you decide to sell your structured settlement, the buyer will make a percentage of profit from your annuity.  See the Sell Structured Settlement Payment homepage for more information.

Q: Can sell my structured settlement for a lump sum for other needs – such as paying off debt or funding my childrens’ college education?

A: A judge will be likely to approve the sale of your periodic payments in these types of situations. If you can prove your need for cash, and show that the it will be used in a way beneficial to your family, your case will typically be approved. The lump sum amount will be determined by you and a professional buyer of structured settlements.