Structured settlements are settlements that pay out in regular, periodic payments usually monthly for a number of years. They are paid out this way instead of being paid in one lump sum.
Agreed upon
These types of settlements are agreed upon when proposed by:
- Defendant;
- Plaintiff’s attorney;
- Financial planner;
For example, you have just won a lawsuit for a car accident where the other person was at fault. You have had numerous injuries, so the court approves you a settlement of many thousands of dollars. You can agree to have this large settlement paid out monthly for the next 20 years. This is an example of a ‘structured settlement’.
Lump Sum
If you suddenly have found the house of your dreams, there are businesses and financial institutions that you can sell your structured settlement to for a lump sum buyout so that you now have the money to buy that home.
Restrictions
There are some states that have laws restricting the sale of structured settlements. Also structured settlements that are tax-free will be subject to restrictions by the federal government on the sale of the settlements to a third party. As well, to prevent the sale of structured settlements, there are many insurance companies that will not transfer or assign annuities to a third party. Due to these regulations and depending on which state you live in, you could be prevented from selling your settlement. But you can go to court and get a judge to approve in some cases the buyout.
Buyout companies
Those companies and organizations that buy structured settlements are doing this in order to make a profit so often their offers might seem very low. It is up to you to make sure that you are dealing with a company that is offering you the largest payoff possible so you will need to research before you decide who to sell to.
Research
Your research should show you that the company wanting to buy your settlement is:
- Well established;
- Well-funded;
- Good reputation.
In the age of the internet it is easy for any outfit that is actually not very reputable to obtain rights to your settlement and then go bankrupt or just disappear before you are paid your buyout money. So research is very important.
Research is very important so you know and understand the details that are behind selling any structured settlement and to make certain that you are receiving a fair deal.
