Periodic Payments started to take off in the 60’s. The driving force behind this was closely associated with the Thalidomide tragedy, which involved medical treatment for pregnant women suffering from nausea that eventually led to birth defects in children, and eventual lawsuits. In fact, there were so many lawsuits that manufacturers could not keep up with the demand. As a result, trusts were created so these companies could pay out over time. This eased the burden on companies giving out these settlements, but also meant that the recipients of the settlements would receive more money over time.


The popularity of structured settlements continued to rise throughout the 1970’s as a result of an increase in personal injury awards and new rulings by the Internal Revenue Service (IRS). The Periodic Payment Act was passed in 1983, this made various tax rulings into law and allowed for the assignment of obligations to be given to a third party. Next came the Tax Reform Act of 1986, this act separated personal and physical injuries and expanded on what qualifies under the Periodic Payment Act. The 90’s brought about Revenue Procedure 93-94 which allows physically injured individuals receiving settlements from mass tort claims (468(B)) to structure their settlements and allows the fund to assign its obligation to a third party. Today, structured settlements can be awarded for a number of reasons, and are common for lawsuits settled out of court. Most claimants get to choose between accepting periodic payments, taking a single lump-sum payout, or some combination of the two.

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