Structured Settlement Company
IRS Definition of Structured Settlement
The term 'structured settlement' according to section 5891 of the Internal
Revenue Code, means an arrangement - "(A) which is established by - (i) a
suit or agreement for the periodic payment of damages that is excluded
from the gross income of the recipient under section 104(a)(2)," or "(ii)
an agreement for the periodic payment of compensation under any workers'
compensation law is excluded from the gross income of the recipient under
section 104(a)(1)," and ''(B) under which the periodic payments are - "(i)
of the character described in subparagraphs (A) and (B) of section
130(c)(2), and (ii) as payable by a person who is a party to the suit or
agreement or to the workers' compensation claim."
Recent developments in the ability to assign periodic payments from a
structured settlement company suggest that the term 'structured
settlement' means simply that payments promised to be made by the released
party to the releasing party will not be made all at once. The releaser
receives spendthrift protection from dissipation of the money due to bad
judgement, bad habits, bad advice, bad company or just plain, old bad
luck. It should be noted that many believe that 90% of lump sum recipients
run out of the settlement money within five years.
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