The process of managing claims paid out after litigation is called structured settlement services. Once a claim is settled, litigation recovery experts can ensure the recipient is paid using the vehicle of their choice.
According to the Internal Revenue Code, a structured settlement is simply an agreement for a regular payment of damages, either by a person who is the responsible party involved, or to honor a worker’s compensation case. These claims are often paid out using annuities or trust funds, as they can be structured to the plaintiff’s individual needs, while providing tax benefits to the paying party.
Professional services assists in creating a schedule of payments, and involves negotiating with the plaintiff, defendant, and annuity insurer to get everyone involved to come to an agreement. Specifically, the defendant, or whoever makes the promise to pay damages to the claimant, signs an agreement in return for a release from the claim. The plaintiff agrees to this release in exchange for these future payments, and if done properly, up front payment for expenses and attorney’s fees.
The defendant can assign its obligation to a trustee, who then becomes obligated to honor the promise to pay the plaintiff. In order to accomplish this through the use of an annuity, the defendant assigns funds to the third party (the insurer of the annuity), which are used to set up the fund.
Another option for paying damages is called a non-qualified assignment. This is typically only used in a case where the settlement does not qualify in accordance with the Internal Revenue Code. Structured settlement services provide a greater ability to plan future claims payments, especially when the case involves more than one defendant.
The design of the settlement dictates the method of payment. Cash flow can go directly to a trust designated by the plaintiff for medical needs, special needs, or another purpose; or the money can be electronically wired to a bank account. Consulting with professional settlement services will help determine the most advantageous route for maximizing returns with the most tax benefits.