Structured Settlements 101: The Complete Guide

General educational content only.

What Is a Structured Settlement?

A structured settlement is a negotiated way to pay injury-claim proceeds as a series of periodic payments rather than one lump sum.

Brief History

• 1970s – Courts begin approving periodic payments for large tort cases.
• 1982 – U.S. Congress passes Public Law 97-473 encouraging tax-free structured settlements.
• 1997 – IRS clarifies tax-free status under IRC §104(a)(2).

Key Features

• Tax-free for physical-injury damages.
• Backed by an annuity from a life-insurance company.
• Payments can last a set term or life-contingent.

Real-World Structured-Settlement Examples

Auto-injury settlement: \$150,000 total paid as \$1,250 per month for 10 years.
Workers-comp case: \$220,000 structured as \$1,000 monthly plus two \$25,000 future lump sums.

Sources: IRS, National Structured Settlements Trade Association, Congressional records.