Debt relief glossary
Structured settlement
A personal injury or workers' comp settlement paid as a series of future tax-free payments instead of a lump sum.
A structured settlement is a negotiated resolution of a personal injury or workers' compensation claim in which the defendant's obligation is funded by an annuity purchased from a life insurance carrier, producing periodic tax-free payments to the claimant. Under IRC § 104(a)(2) and § 130, all payments — including the growth inside the annuity — are excluded from income. Payment structures can include level amounts, inflation-adjusted increases, or deferred lump sums at milestone dates. The annuity is irrevocable once established. Recipients may sell future payments to a factoring company for a discounted lump sum, subject to state Structured Settlement Protection Act court approval.