Structured Settlements

A Structured Settlement is the settlement of a claim or lawsuit by means of cash and future periodic payments. They evolved from the tragic Thalidomide cases in the 1960’s. Many babies were born with serious limb deformities to women who had used this drug for the treatment of morning sickness. Periodic payments were developed as a way of addressing the long-term needs of these affected children. Federal legislation was passed in 1983 which allowed all immediate and future payments used for the settlement of physical injury and physical sickness claims to be income tax-free and assigned to a life insurance company subsidiary (known as an Assignment Company) for the express purpose of paying structured settlements. In 1997, the Tax Code was expanded to grant the same preferred status to Workers’ Compensation structured settlements.

Payments are generally funded with an annuity policy and the payout can be completed customized for the Claimant’s situation. A highly rated life insurance company issues the annuity and administers the payments. The ownership and obligation to make the future payments generally lie in the hands of a third-party company, usually a wholly owned subsidiary of the life insurer, known as an Assignment Company. This creates an even greater level of security and safety for claimants.

John J. McCulloch, JD, WCLS, CMSP of the National Structured Settlements Trade Association (NSSTA) explains in this short A.M. Best video what claims professionals should know about structured settlements.

The many benefits of Structured Settlements include:
  • Customized Tax-Favored Financial Options. Claimants are offered a variety of individualized, long-term, tax-favored options meeting all types of specific long-term monetary needs.
  • Stability and Security. They offer reliability, a rare commodity in today’s unstable financial marketplace. Annuities are a secure and competitive guaranteed investment. They are backed by very solid financial institutions.
  • Capital Protection. Structured Settlements reduce the possibility of settlement funds being dissipated within a short period of time. It is commonly held that in nine out of ten cases, funds from all-cash settlements are spent within five years.
  • Low Risk. There are significant risks to all parties if a case goes to trial. Verdicts go in surprising and unpredictable directions and the cost of litigation is high. Structured Settlements enhance the odds of a successful conclusion before trial by focusing on the Claimant’s needs during the settlement process.
  • Professional Money Management. The Claimant has the benefit of on-going professional money management. No matter the highly-rated financial institution chosen, it has a team of professionals to manage assets so that the investments are not dependent on any one individual.
  • No Fees. The Claimant pays no administration, management or transactional fees.

Whether you are considering a structured settlement for an injury claim, medical malpractice, commercial claims or Workers’ Compensation, you can rely on the structured settlement experts at the IFS Group of companies. Our consultants helped found the industry over thirty years ago and continue to influence its evolution in profound and practical ways. The experience of our nationwide network of consultants, combined with unparalleled customer service, have earned us a reputation as a trustworthy, well-informed partner with whom to do business. Let us assist you in the creation of optimal solutions using structured settlements. Visit EPS Settlements, SFA, JMW Settlements and Millennium today for further information.