Structured Settlement

Sell Annuity: The Origins of Structured Settlements

Do you know the origin of structured settlements and the history of how they came to be? These settlements have not always been around and in the past when people won a settlement such as an insurance claim or a personal injury lawsuit, they were given a check for one big lump sum to do with as they chose. There were many advantages to this of, course but there were also many situations when these lump sum settlements would lead to more problems or even become problems in themselves.

Some people may face injuries that made them unable to work and being dependant on the lump sum payment, they would have to learn how to manage money when they may not have ever been properly taught. Sometimes people would blow the money, invest it poorly or even fall victim to scams leaving them with nothing. Some similar cases would be when the person receiving the judgment were under age and the money was needed to cover their expenses of living, etc.

The law decided to rectify this by created structured settlements that work out when and how much a person will get paid for their settlement. They will typically be made in installments on a monthly or yearly basis. In some cases, larger sums will be given every 2 or 5 years. The exact details of a structured settlement are negotiated between all the parties involved to come up with a solution that works best for everyone but with the plaintiff’s needs up-front and foremost in the decision making.

In 1982, Congress passed The Periodic Payment Settlement Act of 1982 (Public Law 97-473), which legally recognized structured settlement cases in physical injury cases. They also encouraged people to use these structured settlements by granting them tax-free status. For many people, this is the best way to go, especially in the case of minors or people who will be depending on the settlement as a means of income. They are now a common and acceptable way of awarding compensation in these types of settlements.