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Financial Options after a Settlement: Structured Settlements

Financial Options after a Settlement: Structured Settlements

Many personal injury lawsuits end before ever reaching the courtroom because all parties involved are able to come to an agreement. These settlements can either come in a one-time lump sum of money, or can be paid over a period time in a structured settlement.

Payments from a structured settlement, depending on the amount of money involved, can continue for a few months or can last for the rest of their lives. These payments can be particularly useful following a serious injury by creating a constant source of income for the injured person, but you should weight the pros and cons of a structured settlement before choosing that option:


  • Tax Benefits: Because personal injury settlements are considered tax free by the U.S. Tax Code, though some exceptions may apply to certain portions of your settlement, including punitive damages.
  • Guaranteed Income: Structuring your settlement will give you the guarantee of constant income over the length of your agreement, and can give you peace of mind when considering how to afford future medical payments.
  • Payment Flexibility: You can structure your payments to best suit your immediate needs if require a larger percentage of the payment immediately to cover costs, while still providing the long-term payment benefits of a typical structured settlement.
  • Financial Stability: No matter how big your settlement may feel at the time, there is always a risk of overestimating how long it can last. By breaking up the payments over time, you proactively protect yourself from spending all of it too quickly.


  • Unexpected Expenses: New developments, especially if your settlement was for a personal injury, can appear that require larger payments sooner than you expected. By choosing a structured settlement, you could face financial issues if the payments aren’t large enough to cover those expenses.
  • Economic Environment: Because the promised rate of return on structured settlements is often proportional to the U.S. treasury rates, agreeing to terms during an economic recession, like the one from 2008, could leave you in a tough financial situation. You could also find yourself in trouble if inflation dramatically changes over a short period of time because your payments will not change based on any inflation.
  • Future Insolvency: While this is a rare occurrence, there is still the possibility that the company that pays your structured settlement could become insolvent, and your payments could stop. While the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) will cover the payments, state limits may not cover the entirety of what you are owed.

Before you accept any sort of settlement agreement, speak with your attorney to make sure you aren’t leaving money on the table. At The Perecman Firm, P.L.L.C., our New York personal injury attorneys understand the nuances of settlement options, and will help you select the best option to suit your needs. Call us at (212) 577-9325 to speak with one of our NYC personal injury lawyers, or visit our website to request a free case consultation.

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