What Is a Structured Settlement?
A structured settlement provides periodic payments rather than a single lump sum:
**How It Works**
The defendant (or their insurer) purchases an annuity that makes scheduled payments to you over time, funded from your settlement.
**Payment Options**
• Monthly, quarterly, or annual payments
• Increasing payments to match inflation
• Lump sums at specified future dates
• Payments for life or a set term
• Combination of options
**Customization**
Structured settlements can be tailored to your specific needs:
• Higher payments during rehabilitation years
• Education funds for children
• Home purchase lump sums
• Retirement income
**Security**
Payments come from highly-rated insurance companies, providing financial stability regardless of market conditions.
Our attorneys help design structured settlements that meet lifetime needs.
**How It Works**
The defendant (or their insurer) purchases an annuity that makes scheduled payments to you over time, funded from your settlement.
**Payment Options**
• Monthly, quarterly, or annual payments
• Increasing payments to match inflation
• Lump sums at specified future dates
• Payments for life or a set term
• Combination of options
**Customization**
Structured settlements can be tailored to your specific needs:
• Higher payments during rehabilitation years
• Education funds for children
• Home purchase lump sums
• Retirement income
**Security**
Payments come from highly-rated insurance companies, providing financial stability regardless of market conditions.
Our attorneys help design structured settlements that meet lifetime needs.
Tax Advantages of Structured Settlements
Structured settlements offer significant tax benefits:
**Tax-Free Growth**
Unlike investments, structured settlement payments are completely tax-free—including the interest earned. A $2 million lump sum invested at 5% generates $100,000 in taxable income annually. The same amount in a structured settlement generates tax-free income.
**IRC Section 104**
Federal tax law exempts personal injury damages from income tax when paid through qualified structured settlements.
**State Taxes**
Most states also exempt structured settlement income from state taxes.
**Comparison Example**
$3 million settlement:
• Lump sum: After taxes on investment income, you might have $2.2 million after 20 years
• Structured: Tax-free payments totaling $4+ million over 20 years
For catastrophic injury victims needing lifetime income, tax advantages can add millions to effective recovery.
**Tax-Free Growth**
Unlike investments, structured settlement payments are completely tax-free—including the interest earned. A $2 million lump sum invested at 5% generates $100,000 in taxable income annually. The same amount in a structured settlement generates tax-free income.
**IRC Section 104**
Federal tax law exempts personal injury damages from income tax when paid through qualified structured settlements.
**State Taxes**
Most states also exempt structured settlement income from state taxes.
**Comparison Example**
$3 million settlement:
• Lump sum: After taxes on investment income, you might have $2.2 million after 20 years
• Structured: Tax-free payments totaling $4+ million over 20 years
For catastrophic injury victims needing lifetime income, tax advantages can add millions to effective recovery.
Structured vs. Lump Sum: Making the Choice
Consider these factors when deciding:
**Arguments for Structured Settlement**
• Tax-free income growth
• Protection from poor financial decisions
• Guaranteed lifetime income
• Protection from creditors
• Steady income for care needs
• Cannot be depleted by family members
**Arguments for Lump Sum**
• Immediate access to all funds
• Investment flexibility
• Ability to pay off debts
• Home purchases
• Control over assets
• Higher returns possible (with risk)
**Hybrid Approach**
Many catastrophic injury victims use both:
• Immediate lump sum for urgent needs (medical bills, home modifications)
• Structured payments for ongoing expenses
• Future lump sums for anticipated needs
Our attorneys help you evaluate options based on your specific circumstances and needs.
**Arguments for Structured Settlement**
• Tax-free income growth
• Protection from poor financial decisions
• Guaranteed lifetime income
• Protection from creditors
• Steady income for care needs
• Cannot be depleted by family members
**Arguments for Lump Sum**
• Immediate access to all funds
• Investment flexibility
• Ability to pay off debts
• Home purchases
• Control over assets
• Higher returns possible (with risk)
**Hybrid Approach**
Many catastrophic injury victims use both:
• Immediate lump sum for urgent needs (medical bills, home modifications)
• Structured payments for ongoing expenses
• Future lump sums for anticipated needs
Our attorneys help you evaluate options based on your specific circumstances and needs.
Protecting Catastrophic Injury Settlements
Large settlements require protection strategies:
**Financial Predators**
Settlement recipients often face pressure from family, friends, and scammers. Structured settlements protect against:
• Requests for "loans"
• Investment schemes
• Excessive spending
**Healthcare Program Eligibility**
Large lump sums can disqualify you from Medicaid and other need-based programs. Special needs trusts and structured settlements can preserve benefits.
**Divorce and Creditors**
Structured settlements have greater protection from creditors and divorce divisions than lump sum assets.
**Financial Inexperience**
Many catastrophic injury victims have never managed large sums. Structured payments prevent rapid depletion.
**Statistics**
Studies show a significant percentage of lump sum recipients deplete settlements within 5 years. Structured payments provide lasting security.
Our attorneys discuss asset protection strategies appropriate for your situation.
**Financial Predators**
Settlement recipients often face pressure from family, friends, and scammers. Structured settlements protect against:
• Requests for "loans"
• Investment schemes
• Excessive spending
**Healthcare Program Eligibility**
Large lump sums can disqualify you from Medicaid and other need-based programs. Special needs trusts and structured settlements can preserve benefits.
**Divorce and Creditors**
Structured settlements have greater protection from creditors and divorce divisions than lump sum assets.
**Financial Inexperience**
Many catastrophic injury victims have never managed large sums. Structured payments prevent rapid depletion.
**Statistics**
Studies show a significant percentage of lump sum recipients deplete settlements within 5 years. Structured payments provide lasting security.
Our attorneys discuss asset protection strategies appropriate for your situation.
Designing Your Structured Settlement
Work with your attorney to design payments matching your needs:
**Immediate Needs**
• Lump sum for medical bill payment
• Home modification costs
• Vehicle purchase
• Debt elimination
**Monthly Living Expenses**
• Ongoing medical costs
• Attendant care
• Housing costs
• Utilities and food
**Future Needs**
• Lump sums for wheelchair replacement
• Vehicle replacement every 5-7 years
• Future surgeries
• Education expenses
**Long-Term Security**
• Increasing payments to match inflation
• Guaranteed lifetime income
• Death benefits for family
**Life Care Plan Integration**
Your life care plan identifies future needs that the structured settlement should address.
Our catastrophic injury attorneys work with structured settlement brokers to design optimal payment schedules.
**Immediate Needs**
• Lump sum for medical bill payment
• Home modification costs
• Vehicle purchase
• Debt elimination
**Monthly Living Expenses**
• Ongoing medical costs
• Attendant care
• Housing costs
• Utilities and food
**Future Needs**
• Lump sums for wheelchair replacement
• Vehicle replacement every 5-7 years
• Future surgeries
• Education expenses
**Long-Term Security**
• Increasing payments to match inflation
• Guaranteed lifetime income
• Death benefits for family
**Life Care Plan Integration**
Your life care plan identifies future needs that the structured settlement should address.
Our catastrophic injury attorneys work with structured settlement brokers to design optimal payment schedules.