“Last year I was hurt in an automobile accident which was not my fault. We sued the person who caused the accident, and we are settling out of court with their insurance company. My lawyer has said that this is the best way to go, because of the expense of a lawsuit, and that I probably wouldn’t get much more even if we went to court.
My lawyer has also suggested that I should have the settlement award “structured” instead of having all of the money paid to me all at once by the insurance company. He said that with my being near retirement age, this was a good idea. But he didn’t really explain why.
So my question is, how does one “structure” a settlement, and should I do it?”
A settlement which is structured, unlike the lump sum payment of a typical personal injury lawsuit settlement, is paid to the plaintiff (you) over the course of time. Often the period of time is equivalent to the duration of the plaintiff’s life, with the payments taking the form of a lifetime annuity.
Such a settlement can be very beneficial in cases where the settlement will help to take the place of income, as the settlement provides a regular payment, not unlike a paycheck, rather than one large windfall of cash which the recipient may use up before they are able to gain meaningful employment again.
Also, a settlement which is structured can be used to assure an older plaintiff of a lifetime income stream, with an annuity lasting throughout the life of the plaintiff. This can be particularly beneficial where an older injured party has concerns about their care in their declining years.
This type of settlement should be administered by a third-party well-experienced in the administration of this type of arrangement. Typically this will be done by an insurance company or other third-party administrator.
Also keep in mind that if you live in a community property state, personal injury awards are handled differently – generally speaking, unless you keep the monies completely separate, your personal injury award is marital property unless and until such time as you divorce or die. If you live in a community property state, make sure that anyone planning or administering your settlement takes the community property laws of your state into account.