Structured settlement facts for kids

A Structured settlement is an insurance or financial arrangement that is negotiated to end a lawsuit. It is a legal agreement through which an insurance company agrees to make regular payments to a specific individual over a period of time.

Structured settlements created as a way for insurance companies to payout settlements in installments as opposed to large lump sums. Structured settlements may benefit injured people whose settlements might result in their owing taxes, by allowing them to reduce or delay tax payments. They may also benefit younger people or disabled people by providing periodic payments of money over an extended period of time.

Structured settlements require the paper holder (a name for the person who receives payments from the settlement) to wait before they will get money, by spreading payments over a number of years. However there are companies offering to buy such a structured settlement for upfront money. For example, a company might offer to buy a settlement that would be paid in 20 yearly payments for a one-time payment of lower value. Such financing may need to be approved by judge and the insurance company.

In the United States, the sale of a structured settlement may result in tax liability under the Internal Revenue Code.