The History of Structured Settlement Factoring Transactions
August 23rd, 2010 by Darryl Woodson. 2 Comments »
Structured settlements for personal injury cases became popular in the 1980’s, after the U.S. Tax code was modified to provide favorable tax treatment to insurance companies offering periodic payments rather than a lump sum payment. The tax modification also benefited people receiving structured settlements in 2 ways: 1) It provided a guaranteed source of periodic income and 2) provided that the interest earned on a structured settlement was tax free. If an individual took a lump sum on a settlement, taxes are incurred on interest earned.
In a structured settlement, the recipient receives periodic payments over a number of years, often 10 years or more. To fund these payments, the insurer purchases an annuity at a highly discounted rate. This is because the annuity will earn interest over the repayment period. Therefore, the insurer ended up paying less for the settlement, received tax advantages, and the recipient wasn’t taxed on the payments made.
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The History of Structured Settlements
August 23rd, 2010 by Darryl Woodson. 1 Comment »
In today’s world, there are many individuals who have received structured settlements. These often come as the result of a lawsuit victory in a court case against a company or person who has done the recipient physical and personal harm. Structured settlements have an interesting history going back almost forty years.
The definition of a structured settlement is an agreement that is negotiated through a tort action in order to yield payments over a given amount of time. These structured settlements commonly result from a court case process in which the one person was injured and the other party was mandated to pay them. These could result from worker’s compensation because of on the job injuries, personal injury, wrongful employee termination, property loss, or a wrongful death claim in which spouses and minor children are looking to obtain lost wage compensation and intangible support.
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