There are several scenarios that can play out when the recipient of a structured personal injury settlement dies. It all depends on how the structured settlement was originally set-up.

1. The best option for the defendant (insurance company that is paying the structured settlement payments) is to have the structured settlement set-up so that the settlement ends and all payments are stopped upon the death of the plaintiff (you). If you are planning to live for a long time this may be an acceptable option. Unfortunately, many personal injury recipients of structured settlement payments will live a shortened life due to their injuries.

2. Another option is to have the settlement structured so that it pays out a minimum or fixed number of payments, regardless of the state of the original recipient. They call this “period certain” or “guarantee period.” That way, you can easily determine the present value of the structured settlement annuity at any time and any remaining payments would go to the beneficiary of the original recipient, or their estate if no beneficiary is named. This option seems most fair to both parties.

3. Some contracts have a commutation rider which serves to pay a discounted cash lump sum in lieu of future periodic payments upon your death. A commutation provision must be set up at the time the structured settlement is created, in the settlement documents, in order to receive favorable tax treatment. Commutation riders are commonly used in cases where (i) the structured settlement is paid into a special needs trust, (ii) where there is a need for estate liquidity, or (iii) the likelihood that beneficiaries will need (or benefit from) periodic payments is remote. The cost of commutation is generally more favorable then selling to a “cash now” company. Most companies will pay 95% of the present value of the remaining payments valued as of the day of death based using a published bond index. Some companies (such as New York Life and Prudential) use the crediting rate on the day the structure was created as the basis for a discount rate.

4. Another option might be that your structured settlement payments contract has a “joint and survivor” payment stipulated. In this case, the structured settlement payments will be paid to your beneficiary for the remainder of their life.

Structured settlement agreements are extremely complicated. Your best bet would be to have a competent personal injury attorney with experience in these matters review your structured settlement contract and advise you of your options.

Find a good Personal Injury Attorney in your area.

See also my article on: How To Sell Your Structured Settlement Payments

One of the advantages of structured settlements is the payments are tax free. But, following your death, any lump sum or additional payments to your survivors may not be so you should also consult with a qualified tax attorney about the tax consequences to your survivors of inheriting your structured settlement payments.

Michael Thompson is a freelance article publisher. Follow this link to read all of his articles on structured settlements: http://ukandoit.us/MoneyMatters/StructuredSettlements-MainPage.html