Everything You Need to Know About Structured Settlements
Are you in the middle of settling a civil lawsuit? A structured settlement could be in your future.
Structured settlements are one of the most common outcomes you’ll see from a lawsuit. It involves the defendant compensating the plaintiff for their wrongdoing in exchange for the plaintiff dropping the case, as with other types of settlements. Where a structured settlement differs is in the involvement of a qualified assignee, an insurance company, and the guarantee of future income for the plaintiff.
In this post, we’re going to dig in and explain a bit more about how structured settlements work and why this could be the best path forward for your lawsuit. These things can feel daunting, but let us explain how it works, and you can proceed with your structured settlement in absolute confidence.
How Does a Structured Settlement Work?
The structured settlement process is a relatively simple one that can benefit both parties involved in a lawsuit. There are 4 steps in a structured settlement agreement process:
Plaintiff Sues
The process is initiated when the plaintiff sues the defendant, whether it be an individual or a company like JG Wentworth, for compensation for injury, property loss, or illness. To keep the lawsuit from going to trial, the defendant and plaintiff will agree to settle out of court, and when the sum is large enough, a structured settlement is usually the best solution. The case could go to trial and end in a structured settlement as well.
Qualified Assignee
Both parties will work alongside a qualified assignee, which is who will help to determine the terms of the structured settlement (how much each payment is, regularity of payments, how long payments last, etc.). Then, the qualified assignee will obtain money from the defendant to purchase an annuity for the plaintiff.
Purchasing Annuity From Insurer
The qualified assignee will set up an annuity with a life insurance company that matches the terms of the structured settlement agreement. It’s important to note that once the terms of the annuity payments are set, they cannot be changed.
Structured Settlement Payments
With the annuity payments set in stone, the life insurance company now pays the plaintiff payments over a set number of payment periods until the settlement is up. In most cases, the annuity earns interest to protect its value from inflation. If the plaintiff requires cash now, the only way to obtain it is to sell the rights to future payments on a secondary market.
There Are Pros and Cons to Structured Settlements
As you can see, obtaining a structured settlement isn’t an overly complicated process, though it may seem that way. There are positives and negatives to settling a lawsuit this way.
On the one hand, it guarantees an income for the plaintiff over the long term while making the settlement easier for the defendant to pay. On the other hand, if a lump sum is needed to cover things like medical expenses or legal fees, you’ll have to take special measures to obtain it. All-in-all, structured settlements are a great way to settle lawsuits out of court in a way that is amicable for both parties.
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