Nuts and Bolts Definition of Structured Settlement

One thing we all agree on is the fact that lawmakers and attorneys can take a basically simple principle and turn it into a complicated set of regulations, rules, paperwork and court proceedings. The result is that the average person, who is intelligent and savvy, still finds him or herself wondering what the heck a term really means when applied to real life.

For example, exactly what is a structured settlement? Structured how? Settled when? Who decides? Who gets paid? The list of questions can go on and on….and on and on…and on and on Usually the interest in this term begins with a financial need, because selling a structured settlement is a way to obtain cash now.

Since I’m not an attorney and certainly don’t make laws, I am able to tell you in a nutshell what a structured settlement is in layman’s terms. Structured settlements are voluntary payment agreements made between a personal injury victim and a defendant (can’t keep legal terms from popping in!) The settlement the victim receives is set up in a way (structured) so that payments are made over time and are tax-free. There is no lump sum settlement amount. The payments are usually set up as an annuity through an insurance company. The structured settlement is recognized by the government so there are plenty of IRS and other laws and regulations governing the process.

Structured settlements are a great way for someone who caused injury to another person to bring the legal matters to an end. The victim, on the other hand, gets tax free payments. It’s a win-win situation. And really….that is the nuts and bolts of a structured settlement.

Legally, you can now sell structured settlements through a settlement factoring broker. Oops….more terminology. We’ll save that definition for another time!

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