How do courts award structured settlements?

An insurance or financial engagement where a claimant's personal injury tort claim is resolved by adjudging scheduled, systematic remittances is called a structured settlement. Canada being the first country to adopt the modality for children affected by Thalidomide, the settlements were in consequence extensively discharged for personal trauma and injury or product liability. It avoids the throes of a trial and minimizes other legal encumbrances that could accompany litigation. By the 1970s structured settlements saw an upsurge in recognition in the United States due to several judicial decisions ruled in by the IRS thus also creating an eruption in personal injury awards and lofty interest rates.

The legal structure ideally warrants reconciliation between the claimant and the defendant pursuant to an agreement that in reciprocation to the claimant's dismissal of the lawsuit, the appellant should dissipate periodic payments spanning duration agreeable by both parties. The defendant thus enters into a long-term payment obligation that can be dispersed by the plaintiff through annuity purchases from a life insurance company or assigning the liability to a third party. A Qualified Funding Asset is purchased in turn by the third party to facilitate the obligatory transaction. The defendant retains the moral imperatives for periodic discharges in an unassigned case by purchasing annuities from a life insurance company thereby indemnifying the obligation with an equalizing asset. The defendant does not wish to retain long-term obligatory pay out rights in assigned cases and transfers such an undertaking to a third party. The obligation is thus mitigated by the third party who is an assignment company through a qualified assignment. A qualified assignment is a legal device that requires the defendant to remit an amount that substantiates an annuity that funds the obligation of periodic payments.

When structured settlements are homogenized with trial judgments they are known as a periodic payment judgment. Conventional practice would pronounce the end of a trial after a jury releases their verdict. Remnant post-judgment motions are limited to overturning the verdict or reducing the plaintiff's award concerning the settlement. Periodic payment settlements implicate the necessity of a second hearing after the jury has pronounced its decree. This then turns into a periodic payment judgment. When lump sum amounts are involved, barring a new trial or reversal of verdict, the plaintiff is obliged to disperse the lump sum amount unless when not paid, the claimant is liable to execute judgments against the appellant's assets. Periodic payment judgments are optional and rendered under the court's discretion in certain states. This postulates the claimant desirous of the periodic payment judgment to invoke one immediately as soon as the verdict has been announced. A stay of the judgment is consecrated pending the hearing for consideration of the periodic payment judgment. If the claimant or petitioner fails to do so it will lead to a lump sum payment judgment making this motion irreversible leading to a refusal of the periodic payment judgment.

Structured settlements are designed to offer plaintiffs assurances over a specific period of time along with tax benefits of such payments. Under the U.S. tax code, personal injury settlements are considered tax-free.