The Making of Structured
settlements have not always been available.
Victims who suffered a loss were often given a lump sum
settlement, one single large check to do with what they pleased.
many cases these lump sum settlements helped to solve some
problems. But in others
they not only added new dimensions to the problem, they became
problems all on their own.
addition to having to work out new lifestyle arrangements because of
the loss, victims also found themselves having to learn how to
manage large sums of cash, something that doesnít come easily
and/or without making many mistakes in the process.
With small amounts of cash, mistakes are typically pretty
small. With large
amounts of cash, the mistakes can be catastrophic.
someone who has never seen a weekly take home paycheck of more than
$500, getting a huge net payment of a million dollars can seem like
a windfall. Most people
have a hard time seeing how they could possibly go through a million
a few investments, lending cousin Doris $25,000 to start her new pet
care business, and coughing up $15,000 so that nephews David and
Tommy can go to the good college just doesnít seem like that big a
deal. And of course
long-time friend Charley has been out of work for the last 6 months
and is about ready to lose his home.
If he got only $12,000, he could catch up on payments, the
cable, the electric, pay the taxes, and afford to put some food in
the house. What are friends for?
there is Mom and Dad who have been great through all of these recent
problems and who could certainly use a nice vacation.
Not only may the lump sum settlement recipient see things
this way, so may their families.
Pressure can be brought to bear, not so much out of selfish
greed (though that can and does exist), but out a complete
misunderstanding of what the function of this settlement is, what
future costs will be, and how long the lump sum settlement must
few more of these, the attorney fees, some accounting and tax prep
charges, and paying off some medical bills, and that million dollars
has now dropped to $500,000, and a few bad stock purchases and some
nice gifts to worthy charities. and now itís down to $400,000,
which is still a tidy sum by most standards.
But if the million dollars was supposed to last for 20 years,
the same cash burn rate means that it will only last for 8 years.
Sum Settlements For Minors
sum settlements for minors have even more risks.
In most cases, a settlement for a wrongful death has to do
with the death of one or more parents.
This money is generally meant to cover the costs of raising
the child, helping them get through college, and some additional for
the emotional grief and loss.
are laws that are supposed to protect minors from abuse of their
lump sum settlements. While
laws may punish those who abuse their access to these funds, laws
donít replace wrongfully spent money.
When the remaining parent or guardian has complete and
unhindered access to a childís settlement, many abuses can occur
and the child can quickly be left with nothing.
have come up with hundreds of excuses for raiding the lump sum
settlement of a minor child under their care:
buying a house, a nice car, eating out, vacations, wages for
guardian care, etc. All of these things are funded for the family under theories
that child should not be deprived of living in a family with such
confronted with these real life scenarios, it is not hard to see how
structured settlements came to be developed.
The fact is that if you donít have it, you cannot spend it,
lose it, or be swindled out of it, and you cannot have it stolen
The Periodic Payment Settlement
In 1982, Congress
passed The Periodic Payment Settlement Act of 1982 (Public Law
97-473), which legally recognized structured settlement cases in
physical injury cases, also encouraged people to use them by
granting them tax-free status.
act allowed people to financially benefit and protect themselves
from the hazards of a lump sum settlement, and gave courts the
ability to make such an award where there was a realistic potential
for abuse of the proceeds of a lawsuit.
on Structured Settlements