The Basics of Structured Settlements
What you should know about structured settlements

A structured settlement is basically an agreement under which an insurance company agrees to pay an individual a fixed amount of cash for a predetermined length of time if the individual meets an accident. The documents created in a structured settlement include an agreement, a qualified assignment, an annuity application, a court order if a claim is made by a minor, and an annuity policy.
Payments for a structured settlement annuity may be made for the duration of the life of the claimant. This amount paid can be made up of equal installments, installments of different amounts, and lump sums. The payments from a structured settlement Annuity are guaranteed by contract and free from income tax. Since a structured settlement annuity is meant for financial security, it is important to get an assurance of the credentials of the annuity provider.
Present age, monthly expenses, extent of hazard in occupation, and retirement plans are factors that individuals can consider in deciding upon the date of commencement of payment, duration, and periodicity. The structure of payments should not be changed once it has been agreed upon by both parties in order to ensure that the payments remain tax-free. The insurance company making the payment can transfer its obligation for payments to a third party in the case of a qualified assignment.
Before opting for a structured settlement agreement, there are certain issues one should understand first. Purchasing a structured annuity can affect the availability of ready money with an individual.
If payments are made to an estate, they are subject to estate tax but free from income tax. State and federal laws rule the closing of a structured settlement. Usually, the closing process gets completed in 3-6 months. Federal laws require that a court order be obtained by either the customer or the funding company that is purchasing the payment stream so that there are no tax liabilities. The way in which the court order is obtained is regulated by various Structured Settlement Protection Acts which are enforced in 36 states in the United States.
A disclosure statement is made available to the customer 3 to 14 days before the customer receives the transfer agreement. The disclosure statement mentions the amounts to be paid to the customer and their due dates; the Gross Advance Amount and the Annual Discount Rate; disclosures desired by the state; the IRS Discounted Present Value of the amount at that given point in time; and a list of the fees and commissions incurred.
It is advisable to get some attorney advice before going in for a structured settlement. In some states, in fact, legal advice is a precondition to acquiring a structured settlement annuity. However, depending upon the laws being used for the transaction, customers do have the option of waiving legal representation in the Transfer Agreement or obtain an Estoppel letter from their attorney.