What is the Average Structured Settlement Payment?

 

If you choose to receive a structured settlement payment rather than a lump sum, there are a few steps to follow first. When a defendant and plaintiff agree to settle a claim with a structured settlement, both parties discuss a cash sum payable by the defendant as long as the plaintiff agrees to drop the lawsuit. The money is then distributed and usually financed by an annuity as a series of periodic payments.

With that in mind, take a look at the in-depth process of receiving structured settlement payments:

1. The Plaintiff Sues The Defendant

The defendant offers to give money to the claimant in a negotiated settlement to obtain justice for an accident, sickness, or death the defendant caused. This is done in order to avoid the case from going to trial. If the case goes to trial and the judge decides in favor of the plaintiff, the defendant is then obliged to establish a settlement.

2. The Plaintiff And Defendant Partner With a Qualified Assignee

The defendant provides the eligible assignee with money to purchase an annuity for the plaintiff. It helps them to decide the terms of the formal settlement agreement.

They determine issues like how high the monthly payments should be, how long they should continue, whether larger payouts at certain periods should increase, and so on.

3. The Assignee Buys an Annuity from a Life Insurance Provider

The annuity arrangement must be set up to match the needs of the settlement. If the annuity terms are set, they cannot be modified. To pay attorney fees or to fund a designated trust, an instant lump sum can also be set aside.

4. The Life Insurance Company Sends Money the Plaintiff a Sequence of Payouts

In compliance with the provisions of the annuity contract, the annuity receives interest to shield its value from inflation, and selling the right to future payments on the secondary market is the only way for the plaintiff to receive cash from the settlement ahead of time.

How Is the Money Dispersed?

Your payments are made on a monthly, annual, or quarterly basis, depending on the terms of your contract. Payouts come in fixed amounts or according to your needs and may rise or decrease. The funds are generally sent out by a structured settlement payment firm, like Rightway Funding.

Also, the Federal Internal Revenue Services prohibits damages paid for physical harm or accidental death from section 104(a)(2). Punitive damages are not exempt, however.

The IRS, therefore, collects taxes on structured compensation money that has been negotiated as part of monetary damages or suffering that has not been caused by physical disease or injury. Before making financial decisions with possible tax implications, always consult an attorney or tax professional.

Understanding a Structured Settlement Payment

The steps to receiving a structured settlement payment are pretty straightforward as long as it goes through the proper protocol.

If this article helped you understand more about structured settlement payments, feel free to read more of our blog posts. We cover a variety of topics related to online businesses, insurance, loans, and more.

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