Examples of Structured Settlements

Structured Settlement was brought into force through a unique legal arrangement in 1983 wherein settlement between two parties – the claimant who files a lawsuit against the other party, the defendant, for an injury claim or the workers compensation etc., can be settled for the claimant in a structured way of receiving it in installments rather than as a lump sum amount.

To understand it, consider an example. For instance, a claimant may wish to be given $ 10,000 yearly for first 5 years and $ 15,000 for remaining 10 years (given the total compensation amount is $ 2,00,000). The claimant can also choose to have no payments for few initial years and fixed annual installments thereafter to fund retirement needs.

Examples of Structured Settlements

Structured settlements are being used in wide variety of life situations in modern times rather than just being chosen as an alternative way of settling personal injury claims. The various examples of structured settlement are discussed below:

Case of Medical Negligence

Structured Settlements were first brought to the financial scene as a mode of claims settlement when in 1960s, a drug sold widely to treat morning sickness in pregnant ladies, called Thalidomide, caused huge deformities and birth defects in small children. This was for the first time in Canada that structured settlement was used to pay off the claims of a large number of the affected people since the drug manufacturer did not have enough money to settle all claims at once in lump sum amount.

 Claims for personal injury to children

The structured settlements are becoming popular with the settlement of claims for children who have suffered in injury in an accident or due to medical negligence. Structured settlements are specifically beneficial in this case because they not only assure that the child receives the benefits of the settlement amount but also receives a continuous flow of non-taxable income to support his needs. There are no costs for the child and the settlements are backed by top-rated highly credible insurance companies. examples of structured settlementMoreover in case of the involvement of a child in the personal injury loss such as becoming physically disabled, say, in an accident, if the total compensation amount for him is $10,000 then the same could be carried forward to the succeeding years in installments, need for a stable and guaranteed constant flow of income for some time etc. to fund the educational, medical and other needs of the child.

 Retirement Benefits to Senior Citizens

For people in today’s times, the average life expectancy has one up. People always carry the fear of outliving their financial support and thus, structured settlements offer them with a solution. Let us suppose a man suffers a loss in an accident and is due to receive $ 20000 as compensation amount. This victim of personal injury loss can opt for structured settlements in a way that they receive nothing for quite some time and then periodic payments nearing their retirement age. They can be funded with credit worthy insurance companies or the US Government by the Internal Revenue Service Code Section 103(d).

 Case of Worker’s Compensation

There are many occurrences of losses to the workers in a factory or an industry where the worker gets severe physical injuries. The law guarantees right to compensation to these workers. The social security benefits are limited to 80% of the worker’s present income, which may get eliminated if the worker opts for a lump-sum settlement. But, if he opts for a structured settlement, he may continue to receive periodic payments along with the social security benefits in the long run and all of it would be free of taxes.

 Divorce and Alimony Matters

Structured Settlements have gradually become popular in matters of divorce and alimony money. For instance, a couple gets divorced and the husband is due to pay alimony as well as maintenance amount for the child to the wife. In such a case, the wife may opt for a structured settlement in order to receive the whole amount periodically as the child gets older, rather than taking it all as a lump-sum. While for the spouse at the receiving end, it may be good to receive money regularly to fund the financial needs of both, herself and the child, on the part of the paying spouse, he may find it more convenient to pay money I installments rather than bearing the burden all at once.

Thus structured settlement has the potential to benefit all the parties. A fair and fine contact can attend to the financial needs of all parties and can provide a guaranteed and risk-free income stream to the claimant.