by John Darer CLU ChFC MSSC CeFT RSP CLTC
The tax liability for structured settlement payments flows from the nature of the damages the structured settlement payments represent.
- Structured settlement payments are income tax free to payees provided that the payments represent compensation for damages that qualify under Internal Revenue Code Section 104(a)(2) [physical injury or physical sickness] or 104(a)(1) [workers compensation].
- Payments retain their income tax status when paid to named beneficiaries.
- Beneficiaries must be named in writing and in a form acceptable to the annuity issuer. This requirement and the right to change beneficiaries is (or should be) clear in the Settlement Agreement and Release.
- Structured settlements for damages that do not qualify under these sections of the Internal Revenue code offer tax deferral. Payments are generally taxed when received. For example, when resolving an employment lawsuit, structured settlements can be used in legal cases involving sexual harassment, wrongful termination, failure to promote and disicrimination settlements. There is a wide variety of lawsuits and disputes where a non qualified structured settlement can be very helpful in resolving cases.
Work with a credentialed Structured Settlement Expert
Work with a credentialed structured settlement advisor to be sure that your structured settlement is established correctly.
Structured Settlement Beneficiary Articles and Blogs
- Can You Name a Beneficiary for a Structured Settlement? – Structured Settlements 4Real®Blog
- Structured Settlement Beneficiary | Why It’s Important (4structures.com)
- What Happens if You Die and Never Reviewed or Changed Beneficiary in 37 Years? – Structured Settlements 4Real®Blog
- Inherited A Structured Settlement | Guide For Structured Settlement Beneficiary | 4structures.com® LLC – Structured Settlements 4Real®Blog
- Survivor Payments from a Structured Settlement (4structures.com) September 12, 2025
Last updated November 30, 2025