Structured Settlements

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Structured settlements are used to structure the financial and insurance payouts in lawsuit settlements. They are instrumental in resolving some personal injury tort claims or statutory periodic payment obligations.

Structured Settlement Arrangements
These arrangements usually arise in the following way:

  • The injured party settles a tort case with the defendant.
  • Under the terms of the settlement, the injured party agrees to dismiss the lawsuit in exchange for a series of payments over a period of time.
  • Both parties agree on a payment arrangement that is often insured by a third party.

Periodic Payment Guarantees
In order to fulfill the long-term periodic payment obligation, the defendant is often required to insure the periodic payments in one of two ways.

  • In the first case, the defendant purchases an annuity from a life insurance company, which is known as a buy-and-hold case.
  • In the second case, the defendant purchases an annuity from a non-insurance third party and assigns the periodic payments from the annuity to the injured party. This type of arrangement is known as an assigned case.

Along with buy-and-hold and assigned cases, other types of these payments exist. Most of them require a third-party to insure the periodic payments from the defendant to the injured party. These arrangements typically are regulated by state laws, which also address procedures for adjusting the payment structures.

Federal and State Structured Settlements
Structured settlements laws in the United States fall into one of two categories:

  • Federal laws. The source of federal structured settlement laws is the Internal Revenue Code. These laws concern taxes on structured settlement payments.
  • State laws. The two most common state statutes are those concerning structured settlement protection and periodic payment rules. For instance, Medicaid and Medicare regulations affect structured settlements by requiring judgments to preserve medical benefits in structured settlement judgments.

If you have any questions regarding this matter, contact the San Antonio personal injury lawyers of Stouwie & Mayo.

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