If an Individual Dies, What Happens to Their Structured Settlement?

This generally depends on the nature of the structured settlement . If it is initially set up to compensate the recipient for the duration of his or her natural life, then naturally these payments would end with the passing of the measuring life.

Obviously, this is the preference of defendants in personal injury lawsuits, since their liability goes away once the plaintiff is dead. However, in most personal injury cases, there are often dependent family members to think about – particularly if the injury in question limits the plaintiff’s ability to work.

In some cases, a structured settlement  may be period certain. This means that the payments continue for a fixed period of time, regardless of whether or not the recipient survives. If the recipient dies before the end of the period, the remaining payments either go the named beneficiaries or the estate.

Structured settlements  may also be set up for what is known as joint and survivor benefit.  With this type of arrangement, payments continue to a specified person (“survivor”) upon the death of the primary beneficiary until the term of the settlement  is complete.

If you are receiving payments from a structured settlement and are thinking about final arrangements, it’s a good idea to have a discussion with your attorney or tax professional. Selling structured settlements  for a lump sum  may be a good idea or not, depending on the nature of the agreement. Keep in mind that if your payments are for period certain, those payments will remain tax-exempt for your heirs, whereas any investment income or interest generated from a lump sum will be subject to income tax.