Structured settlements
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Offered a structured settlement after your crash? Call for a free case review.
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A structured settlement pays in set amounts on a schedule you cannot change once you sign. For a physical injury, every payment is tax-free under 26 U.S.C. 104, the same as a lump sum.
How structured settlement payments work
The insurer buys an annuity, a contract that pays you on a schedule. The schedule is picked when you settle: monthly, yearly, or lump amounts at set dates. Once signed, it cannot be changed.
Example: a $250,000 claim taken as $50,000 now for bills and the rest as monthly payments for 20 years.
Lump sum compared
| Lump sum | Structured | |
|---|---|---|
| Control | All of it, now | Fixed schedule |
| Risk of spending it fast | High | Low |
| Can change later | Yes | Only by selling at a discount |
| Tax on injury money | None | None |
Taxes
Payments for a physical injury are not taxed either way, per the IRS. With a lump sum, money you invest earns taxable interest later. Inside a structured settlement, the growth is part of each tax-free payment.
Selling your payments later
Buyers pay a smaller lump sum for future payments. Federal law adds a 40 percent tax on the buyer's discount unless a court approves the sale in advance, under 26 U.S.C. 5891.
The 40 percent federal tax falls on a buyer who skips court approval.
So a buyer who rushes you past a judge is a warning sign. The CFPB sued one buyer, Access Funding, over how it treated sellers in need of cash.
Structured settlement questions
What is a structured settlement?
A settlement paid in set amounts over time, usually through an annuity bought by the insurer. You agree to the schedule when you settle.
What is the downside of a structured settlement?
You cannot change it later without selling payments at a discount. Inflation also shrinks fixed payments over the years.
Why am I getting calls from structured settlement companies?
Companies buy payment rights for less than they are worth. They find people through court records. The CFPB has sued one such buyer over its dealings with sellers.
Can I sell my structured settlement?
Yes, but a court must approve it, or the buyer pays a 40 percent federal tax on its discount.
What to do now
Call about my payments(833) 716-6705
We pick up 24/7, review your case free, and match you with a car accident lawyer who charges nothing unless you win.
The terms you sign now are the terms you live with, and a buyer keeps part of every payment you sell. If your claim is still open, most states give you two or three years to file an injury lawsuit. Call before you sign the schedule or agree to sell your payments.