Structured Settlements Definition

Structured settlements for wage and other non personal injuries typically have tax implications. Excise tax on structured settlement factoring transactions audit technique guide.

Crafting A Successful Financial Strategy Using Structured

Structured Settlements 4real Blog Structured Settlements

A structured settlement is a negotiated financial or insurance arrangement through which a claimant agrees to resolve a personal injury tort claim by receiving part or all of a settlement in the form of periodic payments on an agreed schedule rather than as a lump sumas part of the negotiations a structured settlement may be offered by the defendant or requested by the plaintiff.

Structured settlement non taxable. A common misconception is that structured settlement annuity payments are always not taxable. An offer of an annuity outside of a structured settlement or receiving a lump sum will trigger tax liabilities. Do not include the settlement proceeds in your income. This is not true. Like qualified assignments non qualified assignments enable two. Structured settlements have been extensively employed in physical injury and workers compensation claims for nearly 50 years. Unlike some financial investments structured settlements for personal injuries usually have no tax implications. Often referred to as qualified structured settlements these specialized annuity plans 1 offer guaranteed future periodic payments 2 are paid free of federal state and local income taxes. This guide is current through the publication date. What is a non qualified structured settlement. Depending on the reason for the settlement there could be no tax at all and they are transferable and inheritable. But if you receive a settlement for personal physical injuries or physical sickness you must include in income that portion of the settlement that is for medical expenses you deducted in any prior years to the extent the deductions provided a tax benefit. However if you cash structured settlements that are non qualified then youll pay taxes on the cash earned from the sale of the payment rights since you would have paid taxes on the original structured settlement as well. The general rule is if a structured settlement is not taxable then selling the payments also is not taxable as long as the contract provisions dont change and the sale follows the law. This document is not an official pronouncement of the law or the position of the service and cannot be used cited or relied upon as such.

While many types of cases are resolved using structured settlements there are instances where structured settlement annuity payments could be taxable. Workers compensation settlements along with payments from wrongful death lawsuits are included in this tax free benefit. Any dispute or claim that is not eligible for an income tax free qualified assignment per internal revenue code section 130 can benefit from tax deferral through a non qualified assignment. Cash from structured settlements and periodic payments that are taxable. The law imposes several requirements on such sales including oversight and approval by a judge. In short structured settlements are among the least taxed forms of money that can come to someone.