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.)