The agreement also provides that if a structured settlement is agreed to by the client, then the attorney's fees would be paid in a lump sum at the time of settlement. However, the agreement does not state how the attorneys fees are to be calculated in the event of a structured settlement. The principal question is to what extent the use of a structured settlement within the context of the above-described hypothetical presents a conflict of interest for the involved attorney. In recent years structured settlements have been employed with great frequency to achieve settlement in a host of disputed matters. While the impetus for the use of structured settlements originally came from the personal injury bar, it is now common to find the use of structured settlements in other forms of personal disputes, as well as in sophisticated and complex commercial litigation.
Structured settlements differ from lump sum settlements in several important ways.
Most of the proceeds are paid in weekly, monthly, or annual installments to the claimant. Frequently, the deferred installment payments are guaranteed for a number of years, despite the longevity of the claimant. These are all matters subject to negotiation, and depend upon the circumstances of each case. One of the principal benefits to the claimant in accepting a structured settlement offer may be the expectation that it will result in substantial tax savings to the receiving party over a lump sum settlement. In appropriate cases, that portion of the structured settlement which involves periodic payments is not subject to federal taxation.