What Is a Structured Settlement and How Does It Work?

After clients receive large settlement awards they have some financial choices to make about what to do with their money. We are here to provide information to our clients to ensure they make the best choice for their futures.

Structured Settlement

‍A large personal injury award can be set up as a structured settlement. A structured settlement is an annuity that disburses money to the recipient on a monthly or annual basis.

A structured settlement may also provide a plaintiff with a substantial tax benefit. Although personal injury settlements are considered “tax-free” under the U.S. Tax Code, some exceptions apply and can make portions of a settlement taxable, such as an award of punitive damages or interest that accrues on the settlement.

Structured Settlement/Lump Sum Combo:

‍If a person likes the idea of a structured settlement but has immediate expenses such as medical bills, repayment of debts, or rehabilitation costs, a structured settlement can be combined with a lump-sum payment.

Lump Sum

‍Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home or other expensive item, yet be unable to muster the resources because they can’t borrow against future payments under their settlement. Therefore, some people will do better by accepting a lump sum settlement and investing the money themselves.

At Lehmbecker Law we’re here to help clients with these decisions after a large settlement award is received.