The process to receive a settlement in a personal injury lawsuit can take months, or sometimes years.  Once you’ve been awarded a settlement, you will certainly be relieved, but some important decisions still lie ahead.  Once of those decisions is how you want to receive your funds.  Many factors go into this choice, so it is beneficial to know the facts about one common form of disbursement.  Consider the following information about structured settlements.


What is a Structured Settlement?

When receiving your settlement funds, you will have two options.  The first is a lump sum settlement, which means you would receive the total settlement amount at one time.  While there are benefits to receiving a lump sum settlement, some issues may arise as well.  While personal injury settlements are almost always paid tax free, investment of a lump sum payment may affect your tax liability.  In addition, many plaintiffs are concerned that the large windfall may be a challenge to manage, whether they have the itch to spend or people in their life that want access to the funds.

The other option is a structured settlement.  In this form of disbursement, the funds you’re your personal injury settlement would be broken down into payments disbursed on a set schedule determined to best fit your needs.  Many people choose a structured settlement because it is easier to budget and save with smaller, scheduled payments than one large payment in their bank accounts. If you wish to make the settlement from your personal injury case last for many years, a structured settlement may be the right choice for you.

The decision to choose either a lump sum or a structured settlement will greatly impact your financial future.  If you aren’t sure what type of settlement would best fit your financial needs, it is always a good idea to consult professionals.  Your personal injury attorney most likely has experience working with all types of settlement.  You may also want to meet with an accountant or financial planner.  They can help guide your decision to choose a lump sum or structured settlement, and they will also be helpful with what to do with the funds once you receive them.

How does a Structured Settlement Work?

During the settlement process, a licensed structured settlement consultant will work with all the parties involved, including the plaintiff, defendant, and attorneys from both sides.  If you decide to choose a structured settlement over a lump sum, the consultant will use the money from the defendant to purchase an annuity from a life insurance company chosen by you.  The insurance company is then responsible for issuing payments according to the agreed upon schedule.

One benefit of a structured settlement is that is can be extremely flexible.  You should structure payments to meet your financial needs, both now and in the future.  Here are a few common settlement structures:

  • Large Initial Payment — Many plaintiffs in personal injury cases have mounting medical bills or living expenses, especially if they’ve been out of work for some time due to injury. This settlement payout is designed to allow the plaintiff to receive a large initial payment to pay off bills, with smaller scheduled payments to follow.
  • Payments that Increase Over Time — Plaintiffs nearing retirement or looking to plan for the future may choose to increase the amount of each payment over a period of time.
  • Payments that Decrease Over Time — This structure may be appropriate for plaintiffs that expect to see an increase in salary or a significant decrease in expenses over time.

In a personal injury structured settlement, you can also determine how often you get paid, whether it be monthly or yearly, for example.  In addition, you will also establish the time period to receive payments.  You may wish to be paid out over a five year period or over the course of several years.  In conjunction with your attorney and a licensed structured settlement consultant, you will work to structure your settlement based on your immediate needs and long term goals.


You have likely waited a long time to receive your personal injury settlement, so it is important to choose the payment option and structure that works best for you.  Your structured settlement consultant, along with your attorney, will help guide you to make the right decision.  Research all factors, including tax implications, immediate financial needs, and future career and retirement plans.  Whether you wish to avoid taxes on your settlement investments or you hope to make the funds last for many years to come, a structured settlement may be the right choice for you.