Whether one has a crippling injury or not, the sudden award of a large sum of money can be quite daunting to one who has no experience with it. If the victim cannot work, the money must be invested in order to generate income. If the injured party cannot manage the funds themselves, then they must hire a relative or financial advisor to do the job. These situations frequently fare poorly, and many accident victims who receive large financial sums find themselves without any money less than five years after receiving the settlement.

Congress established the laws regarding structured settlements after hearing too many stories of accident victims who were awarded large sums of money, only to have that money taken from them by greedy relatives, bad investments, or reckless, irresponsible spending.

When a settlement is reached between an accident victim and a responsible party, either through negotiation or lawsuit, a structured settlement may be negotiated instead of a lump sum in order to meet the victim’s future needs. The parties and their representatives will meet to discuss the victim’s future needs in terms of care, medical assistance and living expenses and to determine the length of time that the victim will need help. Typical terms can range anywhere from one year to a lifetime. 

Once a figure is determined, that figure is calculated in present-day dollars and the responsible party purchases an annuity, typically through an insurance company. This annuity, through investments handled by the insurance company, will generate the income necessary to make the monthly or annual payments to meet the victim’s needs.

Different accident victims have different needs, and some injury victims will still benefit from a lump-sum payment. Structured settlements work best for those victims who may be unable to work for several years or the rest of their lives. A good example of someone who would have benefited from a structured settlement is Terry Schiavo. Ms. Schiavo, who lived in Florida, was diagnosed as being in a persistive vegatative state, and required around the clock care for more than fifteen years. Her husband did collect from a lawsuit, but that payment was taken in a lump sum. For her long-term care needs, a structured settlement may have worked better.

The beauty of structured settlements is their flexibility. The payments can be arranged to suit most any need or situation where the victim requires care over a long period of time.

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