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Structured settlements and in-house litigators

In-house litigation managers should be conversant with structured settlements. Structured settlements are financial packages permitting a settlement to be paid in regular installments either for a fixed period or for the lifetime of the claimant. Because it is tailor-made for individual cases, the structure may also include some immediate payment to cover special damages. The payment is usually made through purchase of an annuity from a life insurance company. There have been over $50 billion in structured settlements since the early 1980’s.

Structured settlement annuities are only available to those who have suffered a physical injury or death in their immediate family and will receive a settlement from those at fault. The person must buy the structured settlement at the time of settlement. Because of these restrictions, the payment method is available to only a small portion of successful litigants.

In a structured settlement, all the future payments are tax-free, saving a considerable amount of money. An example of a future stream of payments is $2,000 per month for life, with a 20 year guarantee (will pay a minimum of 20 years even if person dies prior to 20 years). (See my May 30, 2005 on including settlements and judgments in total legal spending.)

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One response to “Structured settlements and in-house litigators”

  1. John Darer says:

    In addition to the application of structured settlements for physical injury there are also non-qualified assignments (“NQA”) for the resolution of matters which do not qualify for the tax exclusion(but can be deferred through an NQA) and would be taxable all at once if paid in a lump sum. For example an NQA could be considered in virtually any type of employment scenario, divorce, attorney fees, pnitive damages, policy buyouts, installment sales of real estate or businesses (a new application, environmental clean up funding and more.