A structured settlement is a legal claim that was settled by agreeing to pay over time instead of all at once. The defendant's insurer buys an annuity that pays you on a fixed schedule, and that schedule is the settlement. It is an ordinary financial arrangement with one unusual feature: the law makes it hard to undo, deliberately.
How the payments are actually funded
You are rarely paid by the party who settled with you. The settling insurer buys an annuity from a life insurance company, and that company pays you on the agreed schedule. Three parties end up attached to the same stream of money: the obligor who owes the payments under the settlement agreement, the annuity issuer who makes them, and you, the payee who receives them. Every statute on this record names those roles, because a transfer changes who gets paid and both the obligor and the issuer have to be notified.
Why it was structured that way in the first place
A structure suits some outcomes and not others. For a serious injury with lifelong costs, a schedule paying for care over decades survives the temptation of one large cheque, and the payments are typically received tax-free in a way an invested lump sum would not be. It is also cheaper for the insurer, which buys the annuity today for less than the face value of everything it will pay. That discount, run in reverse, is exactly what a buyer of your payments is doing years later.
The federal rule that makes it universal
Congress made the court step effectively compulsory without legislating for state courts at all. a federal excise tax falls on a person who acquires structured settlement payment rights in a factoring transaction unless the transfer is approved in advance in a qualified order, and the section is quoted in full on the United States row of the record: a final order, judgment or decree finding that the transfer does not contravene any federal or state statute and is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.
Questions people ask about what is a structured settlement
Does a court really have to approve this?
Yes, in every state. The federal exception in 26 U.S.C. 5891(b) applies only where the transfer was approved in advance in a qualified order, and the order must find the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.
What is the single biggest variable in the price?
The discount rate, and after that how far in the future the payments you are selling fall due. The reported range across the market is between 9% and 18%.
Do you take a share of what I get?
No. Buyers pay a flat fee for the enquiry itself, never a share of the discount and never anything contingent on a transfer completing.