In recognition of the growing number of law and graduate students lurking on ELS Blog and in an effort to promote and grow the empirical legal studies field, the ELS Blog editors periodically spotlight promising student research. Jeremy Babener's Note (NYU Law--3L), Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements, critically explores the long-assumed belief underneath structured settlements from an empirical perspective. An excerpted abstract follows.
"Structured settlements have been subsidized by federal, state, and local taxes for nearly three decades. The subsidy, or tax exclusion, which encourages personal injury claimants to forgo a lump sum settlement in favor of long-term periodic payments, is premised upon the belief that claimants prematurely dissipate lump sum settlements. This belief has long been held within the structured settlement industry, and is frequently cited as a proven fact. Anecdotal evidence from industry practitioners, representing a broad cross-section of interests, certainly suggests the belief to be true. However, this article explores the available empirical data. It concludes that the danger of the dissipating claimant has yet to be proven, and that citations relied upon as evidence lack applicability, or sometimes any substance at all."