What is a structured settlement?
A structured settlement is an injury settlement or judgment paid in scheduled installments, often monthly or yearly, usually through an annuity, instead of one lump sum. Texas defines it as an arrangement for periodic payment of damages for personal injuries set by settlement or judgment. People choose it for steady income, often after serious injuries.
Last checked November 9, 2026 · Official sources (4)
What does a structured settlement look like? An example
Example: a 25-year-old with a spinal cord injury settles a truck crash claim. Instead of one check, the agreement pays $150,000 up front for a wheelchair van and home changes, then $3,000 a month for life, plus $50,000 every five years for equipment. An insurance company issues an annuity to fund the payments. Every figure here is an illustration of the structure, not a typical amount.
Why does a structured settlement matter to you?
It can protect money meant to last decades from being spent too fast, and it can keep paying for care long after a lump sum would be gone. The tradeoff is flexibility: once set, the schedule usually cannot be changed.
Taxes are part of the choice. The tax code lets you exclude damages other than punitive damages received as lump sums or as periodic payments on account of personal injuries or physical sickness. Interest or other parts of a deal may be treated differently, so ask a tax professional before signing.
Can you sell structured settlement payments in Texas or Arizona?
Companies advertise cash now for future payments. Both states require a court to approve that kind of sale first.
| State | Rule for selling payments |
|---|---|
| Texas | No transfer is effective unless approved in advance by a final court order finding it is in the payee's best interest. |
| Arizona | The court must find the transfer is in the payee's best interest, taking into account the welfare and support of dependents. |
Buyers usually pay far less than the total of the payments you give up. Compare the amount offered with what you would receive over time.
Structured settlement vs. lump sum settlement
A lump sum is one payment you control right away. A structured settlement trades some of that control for scheduled payments over time. Many settlements mix the two: a lump sum for immediate costs and fees, and a structure for the rest.
Questions
Are structured settlement payments taxable?
Damages for physical injuries are generally excluded from income whether paid at once or over time. Ask a tax professional about your own agreement.
Can I change my structured settlement later?
Usually not. Selling future payments requires a court finding that the sale is in your best interest.
Find out if you are owed money.
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See if I’m owed moneySources (4)
- Tex. Civ. Prac. & Rem. Code § 141.002(13), checked 2026-11-09. “"Structured settlement" means an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim”
- IRS, Tax Implications of Settlements and Judgments, checked 2026-11-09. “"the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or physical sickness”
- Tex. Civ. Prac. & Rem. Code § 141.004, checked 2026-11-09. “unless the transfer has been approved in advance in a final court order based on express findings by the court that: (1) the transfer is in the best interest of the payee”
- A.R.S. § 12-2902, checked 2026-11-09. “The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.”