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January 8, 2014:
Multiple class-action settlements involve this setup.

http://www.inquisitr.com/1082354/more-americans-settling-for-regular-installments-in-place-of-lump-sell-settlements/

Negotiating Payment:

When getting periodic payment judgments, consider whether there are any unpaid debts piling up as a result of injury. A small monthly payout may keep the wolves at your door.

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- Annuities

Since 2002, Many US Lawsuit Settlements and Claims Paid In Structured Formats

The definition of a structured settlement is an insurance or financial setup wherin recurring payments are provided to the injured party (or other claimant) in lieu of a single lump sum amount. In the United States they may be used by insurance companies to pay auto accident claims, or by corporations to settle allegations of product liabilities. Government agencies may also use them if they are found to be at fault for injuries to workers, claims made in foreign countries, or for survivors of an action that was found to be incorrect. Companies may choose to purchase annuities for structured settlement payouts because the cost of trial would exceed the price of making payments to one or more litigants over time, and on the plaintiff's side there are tort and personal injury lawsuits where a settlement delivered in increments may have income taxes waived. Therefore, getting a lump sum up front may cause the plaintiff to have a tax burden that does not happen when an annuity is purchased on their behalf. Some alternative definitions of the term include periodic payments and periodic payment judgments. In the United States, only three states do not have uniform protections under the "National Conference of Insurance Legislations" and this is why advertisers are able to do nationwide appeals for money.

The original idea behind the structured settlement is to create extended financial security for people who have been severely injured as well as their family members. In 1982, when the Periodic PAyment Settlement Tax Act was passed, there was more of a focus on injured breadwinners being unable to take care of their families. Under acts amended in 1997, upon settlement of a claim the periodic payments total is essentially a tax-free payment for damages. The payee puts the money into an annuity and can assign the management of it to a third party, which is generally a life insurance company that specializes in this financial instrument. The advantage for the defendant is that as soon as the money is paid out, they don't have to manage it and there are no long-term obligations on their books which would end up in quarterly financial reporting documents.

 

Notes and Special Information

Special note: This definition and answer to "what is a structured settlement" tries to cut through all the legalese and words like "tort" or "qualified funding asset" so people can understand the meat and bones of annuity payouts. On the plaintiff's side, there may be pressures to immediately cash out the settlement by selling it to a broker or third party. Legal financing companies advertise all over TV and the Internet. These firms are often financed by venture capital or investment organizations, who can profit quite handsomely off a 10, 15, or 20 year payout in exchange for a much lower lump sum. The plaintiff may then end up with half (or less) than the original amount agreed to in the lawsuit.