FAQ on Structured Settlements

Click on any of the frequently asked questions below to view the answers.

Structured settlements are, in essence, guaranteed tax-free annuities.

The tax-free status of structured settlements is as a consequence of Government of Canada regulation; in particular, the tax-free status of a structured settlement is set out in Income Tax Interpretative Bulletin IT365R2 (see this link — https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it365r2/archived-damages-settlements-similar-receipts.html)

Structured settlements were introduced by the Government of Canada to create an incentive for those made vulnerable by injury to invest their settlement monies in something that is not likely to be lost prematurely.

Structured settlements are available only in reference to compensatory damages for personal injury or death.

Structured settlements are available only upon the consent of the casualty insurance company or by Court Order; that is, they must be purchased by the casualty insurance company for the benefit of the injured party.

Structured settlements are available only at the time of settlement and cannot be purchased after settlement funds have passed into the hands of the injured party.

Structured settlements are non-assignable, non-commutable and non-transferable.

Structured settlements, as a source of guaranteed tax-free income, may make the recipient credit-worthy to varying degrees, depending on the plan selected.

Structured settlements are, effectively, judgment proof insofar as the recipient of a structured settlement cannot be forced to cash it out to relieve a debt.

Structured settlements offer rates of return that generally exceed (significantly on a net-of-tax basis for the most part) other guaranteed investment options.

Structured settlements offer a level of security that parallels Canada Savings Bonds.

Structured Settlements impose no management fees on the recipient.