Structured
Settlement
(From Wikipedia, the free encyclopedia)
A structured settlement is a financial or insurance
arrangement, including periodic payments, that 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 and the United States during the 1970s as an alternative to
lump sum settlements. Structured settlements are now part of the
statutory tort law of several common law countries including:
Australia, Canada, England and the United States. Although some
uniformity exists, each of these countries has its own definitions,
rules and standards for structured settlement. Structured settlements
may include income tax and spendthrift requirements as well as
benefits. Structured settlement payments are sometimes called
“periodic payments”. A structured settlement
incorporated into a trial judgment is called a “periodic
payment judgment”.
[edit]Structured Settlements in the United States
The United States has enacted structured settlement laws and
regulations at both the federal and state levels. Federal structured
settlement laws include sections of the Federal Internal Revenue Code.
State structured settlement laws include structured settlement
protection statutes and periodic payment of judgment statutes. Medicaid
and Medicare laws and regulations impact structured settlements. To
preserve a claimant’s Medicare and Medicaid benefits,
structured settlement payments may be incorporated into
“Medicare Set Aside Arrangements” the
“Special Needs Trusts”.
[edit]Definitions
The United States defines “structured settlement”
for Federal income taxation purposes in Internal Revenue Code Section
5891 (c) (1) as an "arrangement" that meets the following requirements:
A structured settlement must be established by:
A suit or agreement for periodic payment of damages excludable from
gross income under Internal Revenue Code Section 104(a)(2); or
An agreement for the periodic payment of compensation under any
workers’ compensation law excludable under Internal Revenue
Code Section 104(a)(1); and
The periodic payments must be of the character described in
subparagraphs (A) and (B) of Internal Revenue Code Section 130(c)(2)
and must be payable by a person who:
Is a party to the suit or agreement or to a workers compensation
claims; or
By a person who has assumed the liability for such periodic payments
under a Qualified Assignment in accordance with Internal Revenue Code
Section 130.
[edit]See also
Annuity
Common law
Disability
Internal Revenue Code
Medicaid
Special needs trust
Structured settlement factoring transaction
Tort