Legal language aside, structured settlements are simple. In a civil case, someone is obligated or agrees to pay another person money to do a bad. Instead just write a cheque, the person in-blames the money toward an annuity of a life insurance company. In that annuity contract are details in the series payments that the person who was aggrieved will receive from the Life insurance company.
The process is about 40 years old. In the 1970s, the courts ruled that a drug called thalidomide administered to pregnant women was responsible for serious and lifelong birth defects, and structured settlements emerged as a way to ensure that the money granted to the child lasted a lifetime.
However, today, most civil-case settlements are global sums. There are two key differences between the settlements of lump sum and the structured settlements: security and long-term taxation. By structuring money over a longer period of time, a structured settlement offers a better guarantee of money in the future than a single payment that can be spent quickly. The money you get from a personal injury is almost always tax-free when you get it. However, once the money is yours, you are responsible for the taxes and dividends of the lump sum.
Source: www.annuity.org/structured-settlements
