What is a Structured Settlement?
A structured settlement is an agreement between a claimant
and a defendant under which the claimant receives a settlement award in the
form of a stream of periodic payments. A structured settlement may be agreed to
privately, in a pre-trial settlement, or may be required by a court order,
which often happens with judgments involving minors.
In 1982, Congress passed legislation affirming that
claimants in personal injury,
wrongful death and worker’s compensation lawsuits could receive their
settlement awards as streams of tax-free income payments through a structured
settlement annuity. Prior to the legislation, settlements were awarded as
single lump sums, and claimants were often burdened with the task of managing
the money themselves. Structured settlements provide a solid foundation for
future financial security. It is important to carefully evaluate the choices
available and decide which payment option is most appropriate.
Benefits of a Structured Settlement
Tax-Free Income
A structured settlement is a one-time opportunity to settle
a personal physical injury claim, including wrongful death, with tax-free
benefit payments.2 It is tax-free based on Section 104(a)(2) of
the Internal Revenue Code. By contrast, the investment earnings on a lump sum
payment are usually fully taxable.3
Predictable Income
Guaranteed structured settlement payments can provide claimants with predictable income for the rest of their lives. These payments can be customized to fit their financial needs.4
Guaranteed Payments for Life4
The availability of lifetime payments can be of critical
importance to claimants, since lifelong income can provide them with increased
financial security. Now that people are living longer, many people are
concerned about outliving their savings.
Payments to the Beneficiary
Guaranteed structured settlement payments can be received by
the named beneficiary on a tax-free basis.4,5 If a claimant
accepts a settlement in a lump sum, there is no guarantee that there will be
money available for a named beneficiary after the claimant’s death.
Compare the Benefits
Example
Consider the difference between a lump sum settlement of
$500,000 versus purchasing a structured settlement annuity. The settlement,
when used to purchase a 30-year certain and life structured settlement annuity
with $500,000 for a 21-year-old male, will provide $1,974 per month and a total
guaranteed payout of $710,705. If the claimant lives to life expectancy, the
total payout would be $1,478,661.
Lump Sum Settlement of $500,000 Versus Purchasing a
Structured Settlement Annuity
Based on rates in effect January 31, 2024. All rates are
subject to change. This chart shows an example of how a lump sum payment and a
30-year term certain and life annuity compare. Returns shown are hypothetical
and are not intended to represent returns on any MetLife product.
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superior service makes it easier for you to do business.
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settlement solution is tailored to meet the claimant’s specific needs for
payments.
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with a dedicated team of industry specialists.
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have strong experience in navigating changing market condition.
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