Structured Settelement

What is Structured settlement?

A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation . Structured settlements were first utilized in Canada and the United states during the 1970s as an alternative to lump sum settlements . Structured settlements are now part of the statutory tort law of several common law countries including Australia , Canada , England and the United States. Although some uniformity exists, each of these countries incorporated into a trial judgment is called a " Period payments." A structured settlement incorporated into a trial judgment is called a "periodic payment judgment."

How A structured settlement annuity works?
A structured settlement is essentially an agreement under which an insurance company agrees to pay an individual a predetermined amount of cash for a fixed length of time if the individual meets an accident. The documents generated in a structured settlement include an agreement , a qualified assignment , an annuity application, a court order if a claim is made by a minor, and an annuity policy.
Payments for a structured settlement annuity can be made for the duration of the life of the claimant. The amount paid can comprise of equal installments, installments of varying amounts, and lump sums. The payments from a Structured Settlement Annuity are free from income-tax and are guaranteed by contract. Since a structured Settlement annuity is meant for long-term financial security , it is important to get an assurance of the credentials of the annuity provider.
The periodicity of payment is entered into the settlement agreement . Factors that individuals can consider in deciding upon the date of commencement of extent of hazard in occupation , and retirement plans. In order to ensure that the payments remain tax-free , the structure of payments should not be altered once it has been agreed upon by both parties. In the case of a qualified assignment, the insurance company making the payment can transfer its obligation for payments to a third party.

There are issues that one should understand before opting for a structured settlement agreement. If payments are made to an estate , they are free form income tax but subject to estate tax . Purchasing a structured annuity can affect the availability of ready money with and individual.

State and federal laws govern the closing of a structured settlement. The closing process usually gets completed in 3-6 months. Federal laws stipulate that a court order be obtained by either the customer or the funding company that is purchasing the payment stream so that there are no tax liabilities . The manner in which the court order is obtained is regulated by various "Structured settlement Protection Acts", which are in force in 36 states in the United States.