# Structured settlement

> A structured settlement pays an injury settlement as fixed future payments, often funded by an annuity, instead of one lump sum. How it works and is taxed.

Canonical page: https://accidentclaimfacts.com/glossary/structured-settlement/  
Last reviewed: October 29, 2026 by the Accident Claim Facts editorial team  
General information, not legal advice. Talk to a licensed attorney in your state.

## Quick answer

A structured settlement pays all or part of an injury settlement as a series of future payments instead of one lump sum. The amounts and dates are fixed when the settlement is signed, and the payments are often funded by an annuity from an insurance company.

## In a car accident claim

Most car accident settlements are paid in one check. In larger cases, part of the money may be paid as a structure, sometimes alongside a lump sum for immediate costs.

Federal tax law shapes how these work. Under the rules for a qualified assignment, payments must be fixed and determinable in amount and timing, and the person receiving them cannot speed them up, delay, increase or decrease them. They are funded by an annuity from a licensed insurance company or a US government obligation. Damages for personal physical injuries (other than punitive damages) are excluded from gross income whether paid after a lawsuit or by agreement, and as a lump sum or as periodic payments, so a structure paid over many years gets the same treatment as a single check.

Because the schedule is fixed, it cannot be changed later if needs change. Companies offer to buy future payments for a discounted lump sum. Without an advance qualified court order approving such a sale, the buyer owes a 40% federal excise tax on the discount. The guides to [taxes on settlements](https://accidentclaimfacts.com/money/are-settlements-taxable/) and [settlement negotiation](https://accidentclaimfacts.com/claim-process/settlement-negotiation/) explain where a structure fits.

## Example

> **Example:** A teenager is seriously injured in a crash. The settlement pays part of the money now for medical bills, and the rest as monthly payments starting at age 18, plus larger payments at set ages for school costs. An annuity bought at signing funds the schedule.

## Related terms

- [Settlement](https://accidentclaimfacts.com/glossary/settlement/)
- [Life care plan](https://accidentclaimfacts.com/glossary/life-care-plan/)
- [Guardian ad litem](https://accidentclaimfacts.com/glossary/guardian-ad-litem/)

## FAQ

### Can you change a structured settlement later?

Generally, no. The payments are fixed when the settlement is signed and cannot be sped up, delayed, increased or decreased by the person receiving them.

### Are structured settlement payments taxable?

For a personal physical injury, federal law generally excludes the damages from income whether they are paid in a lump sum or over time. Punitive damages and some other parts of a settlement are treated differently.

## Sources

- [Cornell LII, 26 U.S.C. § 104](https://www.law.cornell.edu/uscode/text/26/104) — exclusion for personal physical injury damages, lump sum or periodic
- [Cornell LII, 26 U.S.C. § 130(c)](https://www.law.cornell.edu/uscode/text/26/130), checked October 29, 2026
- [Cornell LII, 26 U.S.C. § 5891](https://www.law.cornell.edu/uscode/text/26/5891), checked October 29, 2026