A structured settlement is a proven, effective solution for the needs of personal injury claimants. For years, they have been widely used in the tort area to compensate severely injured, often profoundly disabled, tort victims. In a structured settlement, the parties reach a voluntary agreement, under which the injured person receives damages in the form of a stream of periodic payments.
These payments come from a well-capitalized, financially experienced institution and are tailored to meet the victim's future medical expenses and basic living needs. These payments may be scheduled for any length of time — even as long as the claimant's lifetime — and are structured to meet the financial needs of the claimant. Payments can be in equal amounts or can vary. They may include future lump sums.
A structured settlement arrangement may be agreed to privately, as in a pre-trial settlement, or it may be required by a court order, as in a settlement or judgment involving a minor. Claims professionals, plaintiff attorneys, judges and defense attorneys advocate the use of structured settlements because they can effectively meet a claimant's needs for security, and provide more benefits over time than a single, lump-sum settlement because of applicable tax rates.