Structured settlements

A structured settlement is a financial or insurance arrangement, defined by Internal Revenue Code as periodic payments; a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada after a settlement for children affected by Thalidomide. Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sumsettlements. The increased popularity was also due to several rulings by the IRS and an increase in personal injury awards. The IRS rulings changed policies such that if the requirements were met then claimants could have federal income tax waived.

Structured settlements have become part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Structured settlements may include income tax and spendthrift requirements as well as benefits and are considered to be an asset-backed security.Often the periodic payment will be created through the purchase of one or more annuities, which guarantee the future payments. Structured settlement payments are sometimes called “periodic payments” and when incorporated into a trial judgment is called a “periodic payment judgment." These payments are also called a coupon for a regular bond.