Blog Post

Do Structured Settlements Earn Interest?

John Darer • Dec 10, 2019

Do You Earn More Than What is Put Into a Structured Settlement?

interest structured settlement

Some people get confused about whether there is interest on or in a structured settlement. We're so used to depositing money in a bank savings account, CD or money market account, earning interest and seeing it on our account statements each month.

A structured settlement is a contractual arrangement method to settle a claim or lawsuit. You agree to give up your claims in exchange for a promise to make future structured settlement payments. That future structured settlement payment obligation is then funded with a structured settlement annuity. Structured settlements are not meant for payments under 5 years. The total future payout exceeds the Structured Settlement Funding Amount. That difference is the interest.  If the structured settlement payments represent damages for personal physical injury, wrongful death, workers compensation or wrongful imprisonment, then payments are income tax free.

The Internal Rate of Return gives you a means to compare structured settlements to alternative investments.

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