A structured settlement is an agreement between a claimant and a defendant wherein the latter is obliged to pay the claimant compensation over a personal claim. The total amount may be too exorbitant for the defendant to pay as a lump sum, and thus it is decided after a formal agreement to be paid in the form of an annuity.
There are different types of payment options in a structured settlement, and these mainly depend on the needs of the payee. The options pertain mainly to the timing of cash flow- yearly or monthly, and also whether the money is sent directly to the payee, or to a trust set up for this purpose, or transferred electronically to the payee’s account.
The most common mode of payment is the lifetime annuity that provides the payee a structured income for the duration of his/her lifetime. For payees with special funding requirements, a differed lump sum payment works well. There are other types of payments like step annuities, percentage increase annuities, period certain annuities etc, each with a specific payment option for amount and duration.
Depending on the financial needs of the claimant and his/her future requirements, the two parties can find a payment plan that fits well for them.