Lump Sum Settlements from Personal/Physical injury cases are awarded income tax-free. In a Structured Settlements, payments can be set up weekly, monthly, quarterly, annually, for life, or with guaranteed lump sums at specific dates down the road.
Unlike variable annuities sold by investment houses, the structured settlement payments are guaranteed. They are not tied to the stock of any company, and can not, and will not change. Structured Settlements also do not include annual costs, fee’s, or investment charges of any kind. The Tax-Free Structured Settlement Annuity is only available to injured parties or cases where a personal injury has occurred and the claimant has not received the settlement proceeds. The majority of the population will never have access to this investment opportunity.
Internal Revenue Code sections 104 and 130 provide the ruling and guidelines for structured settlements. In settlements involving a physical injury, payments will be tax-free to the recipient whether paid in a series of periodic payments or in a single lump sum.