On Structured Settlements

Well, for sure a structured settlement is one that you can purchase. If you also have a structured settlement then you can of course sell it. Sounds cryptic right? It’s quite difficult to process and I for one am puzzled over the attention over this particular phrase so I did a little research on what structured settlement is all about.  From what I gathered, this seems to be some form of ‘areglo’ if we go for the more colloquial Filipino term.  I’ve known about certain individuals who are willing to purchase somebody’s total pension for the entire amount or others still who would also buy future insurance claims (for terminal cancer cases as an example) but this is the first time I’ve heard about purchasing structured settlements, so read on.  You might learn a thing or two.

What Is A Structured Settlement?

According to dear old Wiki,

‘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.’

Here’s more:

According to the US’ Internal Revenue code:

‘A structured settlement is an arrangement that meets the following requirements:

• A structured settlement must be established by:
◦ A suit or agreement for periodic payment of damages excludable from gross income under Internal Revenue Code Section 104(a)(2) (26 U.S.C. § 104(a)(2)); or
◦ An agreement for the periodic payment of compensation under any workers’ compensation law excludable under Internal Revenue Code Section 104(a)(1) (26 U.S.C. § 104(a)(1)); and

• The periodic payments must be of the character described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c)(2) (26 U.S.C. § 130(c)(2))) and must be payable by a person who:
◦ Is a party to the suit or agreement or to a workers’ compensation claim; or
◦ By a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with    Internal Revenue Code Section 130 (26 U.S.C. § 130).’

Structured Settlement In Layman’s Terms

A structured settlement therefore is an arrangement in written form wherein a claimant promises to compensate an injured party. For example a person walking along a pavement gets hit by a falling restaurant signage. The person sought legal action against the restaurant for the injury that he received as a result of getting hit by the signage. To settle the case out of court, the restaurant owners proposes an arrangement set in writing wherein they will pay the injured a set number of agreed upon payments every month for a specified time. This arrangement is called a structural settlement.

Now there are companies (JG Wentworth for example) that are willing to buy off that structured settlement from the injured party for a discounted lump sum. Sure the injured party will get a lesser amount but then again, he will be receiving everything at once and not on a monthly basis.

Disclaimer

Please note that I’m no lawyer and this is just my own interpretation. I’m just an interested party trying to learn a little bit about legal stuff, plus the fact that ‘structured settlement’ is one of the more profitable keywords (Adsense wise) out there.