Understanding Qualified Structured Settlement Assignment and Funds

A structured settlement is a way to settle a personal injury or workers comp case where the injured party wins a certain amount of money and the money is setup to be distributed through a periodic payment plan.

A company that enters into a structured settlement also has to sign a separate contract called a qualified structured settlement assignment agreement. It is common practice that the insurance company that is paying out the settlement, transfer its obligations to a third party assignee. This is because the company that is responsible for the injured party, does not want a long-term obligation of payments sitting on their financial books. This type of assignment is also tax free.

This agreement is between the responsible company and the 3rd party assignee which is usually a sister company of the insurance company that works for the responsible party.

There are two kinds of assignments in personal injury and workers comp cases. They are the qualified and the non qualified structured settlement assignment. A non qualified assignment is usually a periodic payment to the injured person but stays on the books at the responsible company. This non qualified assignment is not tax free and goes beyond the qualified structured settlement.

Most injuries in this context is emotional distress and other personal injuries that are not physical in nature. These types of injuries are mostly not covered by insurance companies but do still make the responsible company obligated to pay the injured party if the case is won. A qualified structured settlement fund is a fund that is set up to allow a lawsuit with more than one claimant to be settled before the arrangement of the amounts of money are allocated.

The fund allows a defendant to negotiate their part of responsibility while the other defendants are still in litigation. This gives the defendant a simple and complete release from a multi party case. This just means that when the whole litigation is done and over with, if there are funds that have to be allocated extra, then what was originally agreed on, the defendant with the qualified fund would not have to include their company in the extra funds.

A qualified structured settlement fund must meet three requirements. It must be approved by a government entity, applicable under state law, and it must be an eligible claim.

Source by Louis Z.