How to Calculate Structured Settlement Payout
Understand the time value of money, the Present Value formula, and calculate estimated net lump-sum payouts.
The Mathematical Formula
A structured settlement pays out over time. If sold for an upfront lump sum, a purchasing company calculates the Present Value (PV) using an annualized discount rate:
$$PV = P \times \left[ \frac{1 – (1 + r)^{-n}}{r} \right]$$
- P: Periodic payment amount (e.g., monthly check)
- r: Periodic discount rate (\(\text{Annual Rate} \div \text{Payments Per Year}\))
- n: Total remaining payments (\(\text{Years} \times \text{Payments Per Year}\))
Net Payout: \(\text{Net Payout} = PV – \text{Administrative / Legal Fees}\)
Live Payout Calculator
Total Future Value
$120,000
Gross face value
Present Value (PV)
$75,637
Before transaction fees
Estimated Net Cash
$73,137
60.9% of nominal value