Structured settlements were used for the settlement of children suffering from thalidomide for the first time in Canada. Structured settlements are widely used in product liability and personal injuries (such as thalidomide birth defects). Before discussing further first let’s see what is a structured settlement.

what is structured settlement

What is a structured settlement?

A structured settlement can be considered as a insurance or financial agreement. Here a claimant can resolve a personal injury claim by get getting payments on a periodically rather than paying it in lump sum. A structured settlement can be implemented to reduce legal and other costs, by the avoidance of trial. Structured settlement cases became more popular in the US in the 1970s as an alternative to the lump sum payment practices.

The popularity had increased as a result of several judgments of the IRS, an increase in the personal injury awards and higher interest rates growth. IRS decisions changed the policy so that, if certain conditions are met, the applicant may have a waiver in federal tax. Higher interest rates currently produce lower values. Therefore deferred payments’ annuity premium versus lump sum.

Structured settlements are part of the law of the legal liability of several common law countries, including Australia, Canada, England and the United States. Structured settlements include the income tax and also the spendthrift requirements. Even the benefits are  considered as asset backed security. Often the periodic payment will be set up by buying one or more pensions, guarantee future payments. Structured settlement payments are sometimes referred to as periodic payments and if it is included in a sample judgment as a “periodic payment judgment.”

Legal structure

Typical structured settlement are constructed and it arises as follows: An aggrieved party (the applicant) an action for damages based on the defendant (or his insurer) under a settlement agreement, which provides the guarantee for the applicant to discontinuation in exchange of the request, the defendant (or, more often, your insurer) agrees to make a series of regular payments over time. The defendant or the insurance property/casualty, agrees a long-term payment obligation for the complainant. To fund this obligation, the property/casualty insurers typically takes one of two typical approaches: Either buy an annuity from a life insurance company (an arrangement called the event “buy and hold”) or it assigns (or, more precisely, the delegates) the periodic payment obligation to third parties (assigned case), which in turn buys a “qualified funding asset” for the obligation to fund associated with regular payment. Under IRC 130 (d) A “qualified funding asset” can be a pension or a commitment from the US government.

Add a missing case, the defendant insurer or property/casualty maintains regular payment obligations and funded by the purchase of an annuity from a life insurance company off the engagement with a corresponding asset. The cash flows from the bonds bought exactly coincide in time and quantity was regular payments in the Settlement Agreement. The defendant or property/casualty own the annuity and the name of the applicant to the beneficiaries of the pension and thus draw pensions issuer to make payments directly to the applicant. If one of the regular payments are life (i.e.; the obligation to make a payment subject anyone to stay alive), then the applicant is (or is determined to be the life of measurement) as the recipient or the measure of life from the pensions referred to. In some cases, buy a life insurance policy as a cover in the event of death of a displacement of the settlement by the buyer.

In an unassigned case, the defendant or property/casualty retains regular payment obligations and finance it by making a purchase from a life insurance company. Accordingly, the defendant or property/casualty insurers transfers the obligation by law device called qualified assignment to a third party. The third, called a sale of the business is the defendant or property/casualty pay enough for a pension, must be financed from the requirement to newly agree regular payment to buy. If the applicant agrees to the transfer of the obligation of the periodic payment, the accused or business ownership/claim is no longer required to provide regular payments. This method of exchanging the debtor for the accused or business/property damage, do not want to keep the periodic payment obligation in the books desirable. A qualified mission is for the applicant asset, and you do not have to rely more on credit accused or company property/casualty as preferential creditors. Typically, a company’s mission is a life insurance subsidiary, as the pension acquired.

The assignment has to be “qualified” if they meet the criteria that is set in Internal Revenue Code section 130. Qualification of assignment is vital because without that they receive the amount to encourage them to take over the payment obligations periodically would be considered as income for federal income tax. When a task is permitted in accordance with Section 130, however, the amount received is excluded from income of the assignment company. This provision of the Tax Code was enacted to promote cases assigned; without them assignment companies needed to pay income tax, but not the source from which to make the payments in general.


The type of structured settlements requires people to wait for funding. After signing the contract, on an average, it takes about 45 days to get the money. However, there are ways to get money or a cash advance structured settlement. Several legal financial companies may provide for all or a part of a structured settlement (payments or fixed annuity) for a lump sum cash payment in advance. Basically, these companies can change, for example, a structured settlement payment for more than 20 years (with a slight value) to one payment now. These funds can be used to pay for a house, send their children to college or to pay its debts. This funding approval of a judge and the insurance company is required. In 2012, a Tennessee Chancery Court were to deny an order, the transfer of a beneficial settlement payments for workers’ compensation insurance as part of a structured settlement agreement. Judge William E. Lantrip argued that the compensation for workers were not in the definition of the term “structured settlement” under the law on Structured Settlement Protection Act.

Buyer of structured settlement is a person or a company that buys an existing structured settlement. These colonies can make payments for lottery winnings and pensions. As ordered by a court structured settlement pays $ 5,000 per year for 20 years.

Appears in

J.G. Wentworth is the largest buyer of structured settlements in the United States. The company is responsible for the “Opera” and “Opera in a bus” ads appeared  in 2010 in most of the cable channels. J.G. Wentworth ads are often seen on parodies and many have been born from it. The CEO has appeared on Fox News to discuss the effectiveness of the campaign.