ANNUITY SETTLEMENTS

For many years, plaintiffs who won compensatory damages from a defendant received large lump-sum settlements. While the payouts helped recipients pay for medical expenses and other costs related to the legal settlement, many lacked the financial know-how required to skillfully manage large awards.

The Periodic Payment Settlement Act, passed by Congress in 1982, encouraged the use of structured settlements in physical injury cases, and provided legal incentives for their use by amending the federal tax code. It also stated that payments be offered in installments over time and exempt from federal, state and local income taxes.

Why Do People Receive Structured Settlements?

The federal government enacted the PPSA to protect claimants from quickly spending large sums of money they received from legal settlements. The most common types of settlements include personal injury cases, wrongful death cases and workers' compensation claims.

Personal Injury

A plaintiff wins a large jury award or settles a claim for a large sum, and the amount is structured into monthly or annual payments over time. Those payments help recipient pay for medical expenses or other costs.

Wrongful Death

A common way to compensate the family of someone whose death was the subject of a wrongful death claim.

Workers' Compensation

Pays workers who get injured on the job while they recover from their injuries.

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