Here is a quick summary of how a structured settlement periodic payment plan works:

• You Opt For Structured Settlement:When you are about to settle your claim (such as a personal injury, or a workmen's compensation claim, etc.), you specify a portion (or all) of your settlement amount to be paid to you in periodic payments. You have to do this before a settlement has been reached/finalized.

  Those payments can be tailored to your needs and desires, and can be spread over many years, or to last your lifetime.

• The Defendant Buys/Invests in an Annuity: that would accrue/generate the interest that would cover your periodic payments. The aforementioned annuity investments that are used to produce such tax-free periodic payments for you are in the form/types of investments that are deemed highly reliable.

  
  

• You Receive Tax Free Periodic Payments: Any money that you receive in the form of any such periodic payments are fully exempt from tax liabilities. In other words, the interest so generated is viewed as compensation for the injuries that you have suffered, and is therefore not taxed by the IRS.

If you were to receive all of the money from your settlement in the form of a one lump sum amount in cash, and then to invest it subsequently, any interest that you may earn from any such investments would not be exempted from tax. It would be treated just like any other taxable income.

Historical data shows that far too many people who opt to receive their settlement award in the form on a lump sum cash payment usually dissipate most (if not all) of their settlement money prematurely -often disposing it off in as little as few years -the settlement money that was supposed to provide support for a long time, if not the life time. The reasons why this happens so often are many: ranging from being a victim of investment fraud, bad investment choices, or just bad luck.

Considering that Structured Settlement payments are derived from the interest generated from extremely reliable investments (in highly rated life insurance companies, or in government backed investments), and the fact that all such periodic payments are fully tax exempt; it is almost always in one's best interest to receive at least a portion of one’s settlement award in the form of periodic payments.