by 
The Curious Bag
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A structured settlement is a financial arrangement arising from a lawsuit, pre-litigation, or worker's compensation settlement. Payments are made on a predetermined schedule until the structured settlement is fully paid.
Calculating Payments
Structured settlements are calculated by determining the total amount of the settlement and dividing the amount by the number of years the settlement is to be paid. This is then divided into equal payments.
Making Payments
Structured settlements are paid on a predetermined schedule. Payments are made by check or direct deposit, and can occur weekly, bi-weekly or monthly.
Advantages
When receiving money in regular increments, there is less chance of mismanagement. It also allows the recipient to depend on a regular source of income and avoid owing taxes on the entire amount at once.
Disadvantages
Recipients who have outstanding expenses from medical care or credit cards used to cover bills while out of work are not able to pay off their debts all at once.
Settlement Funding
If a recipient is unhappy with the payment structure, he may utilize a "settlement funding" service. Settlement funding companies buy out structured settlements in exchange for a lump sum. However, the recipient loses up to 60% of his settlement.
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