At one time, personal injury and workers’ compensation claims were only settled with the exchange of a lump sum of money. Unfortunately, cash-only settlements that are meant to last for decades are often exhausted within a few years.
A structured settlement is a settlement option that was developed in response to this outcome; it provides greater security and certainty to people made vulnerable by injury. While a conventional injury settlement consists of a one-time sum of money, a structured settlement usually includes cash at the time of settlement to cover immediate expenses, plus guaranteed periodic payments customized to meet the needs of injured people and their families for years into the future. Structured settlements are the best way to ensure a strong financial future for all parties involved. Handled properly, structured settlements provide tax-free payments to claimants, and final resolution for defendants.
What individual needs can a structured settlement address?
- Lost wages
- Medical expenses and equipment
- Rehabilitation and training
- Funds for children’s education
- Retirement income
- Home modifications
- Anticipated special purchases
- Funding for memorials and scholarships
Why choose a structured settlement?
- Individualized financial options: Payment flexibility allows parties the freedom to tailor payments to meet current and future needs. A structured settlement can make payments for a stated period of time, or can last an entire lifetime. Payments can be made monthly, annually, or at whatever intervals best address a person’s needs. Payment amounts can be fixed or can increase over time.
- Stability and security: Structured settlements offer unmatched protection against future loss or dissipation of funds. People don’t have to be concerned with making a single payment last a lifetime.
- Tax-free income: Payments received in the settlement of physical injury and workers’ compensation cases are completely tax-exempt at the federal and state level, whereas investment earnings from all-cash settlements are generally taxable.
- Capital Protection: Unlike traditional investments, which can lose money with the fluctuation of financial markets, structured settlements provide protection from economic uncertainty in an unpredictable economy. They are funded with annuities from major life insurance companies or U.S. Treasury obligations.
- Low risk: Going to trial involves significant risks to all parties involved, and the time and expense of litigation can be a significant burden. Structured settlements allow the parties to author their own futures without the unpredictability of a trial.
- Professional Money Management: Each highly-rated financial institution has a team of professionals to manage the assets in a structured settlement.
- No Fees: There are no ongoing fees for administration, management or transactions, and no fees for the consultation of Arcadia structured settlement experts.
A more secure future: one woman’s story
A 45-year-old woman is injured in a multi-vehicle accident. She is still able to work, but is concerned about future medical care due to her injuries. Rather than settling her claim for a single $100,000 payment, she chose a structured settlement offering the following:
- $50,000 cash at settlement to cover her attorney fees and costs, medical bills plus immediate cash to her, to pay off a credit card and put a down payment on a house.
- $1,500 paid annually for 10 years, then $5,000 paid annually for the duration of her life.
The total anticipated payout to her based on a normal life expectancy is $195,000, a much larger payout than the lump sum, and timed to meet long-term needs. If the Claimant lives beyond a normal life expectancy, the annual payments continue for as long as she lives. The structured settlement offered this Claimant peace of mind and secure, tax-free income for life.