Structured Settlement
A structured settlement is a type of annuity that guarantees an equal amount of payment on a certain interval. The payment frequency might be weekly, monthly, quarterly, bi-yearly, or yearly. The regular payment goes on for a certain amount of time usually a large chunk of the plaintiff’s life. Another special feature of this type of compensation payment is that it is free of tax which means the injured party can receive the money without being liable to pay government tax on it.
The structured settlements are normally awarded due to wrongful injury/death, tort, professional negligence, etc. When two parties mutually agree to settle their case outside the court, they negotiate a structured settlement where the defendant buys an annuity for the plaintiff in exchange for dropping the lawsuit. There are a few other parties involved in the process e.g., the financial and legal advisor of both parties and an insurance company.
Lately, Structured settlements have become a very popular option to resolve the lawsuits for various wrongful injury cases as it assures a certain amount of steady income through a remarkable portion of the injured party’s life. For the defendant, the cash required to buy an annuity is often lower than the actual compensation awarded to the plaintiff.
Selling A Structured Settlement
If there is any unexpected change in the financial conditions of the claimant, they may consider to sell annuity payment to the structured settlement buyers. Thus, the party can meet their financial needs by the lump-sum payment they receive from selling their annuity to an organization or individual who specializes in buying annuities.
Unlike the open market annuities, the structured settlements need court approval to be handed over. A judge will give you the decision of whether or how much of the annuity you can sell depending on your circumstances. The law allows parties to sell their structured settlement payment after getting court approval. But there are certain situations when the judge might not allow you to sell your payment. It normally happens when the court decides that selling your future payment is against the best interest of you, your family, or your dependents.
There are a few ways you can sell your structured settlement in
Sell in its entirety — It means you will no longer hold any right or, entitlement to receive any future payment from the arrangement.
Sell a certain number of installments/payments — You can transfer the rights to receive a specific number of future payments after which you will automatically regain the rights to receive the next payments.
Selling only a portion of your payments — You can sell a portion of your structured settlement like 25% or, 50%, etc. to the interested buyer. In this case, as well, you retain the right to receive the remaining portion of the settlement.
Reasons for selling a structured settlement
Although the structured settlement assures a steady income the plaintiff’s financial situation may change overnight and he/she may require to encash the annuity payment. There are multiple situations when the injured party may consider selling their payment on the secondary market.
- – Paying off debt arising from sudden and unexpected costs that can’t be deferred. It also helps the individual to maintain the desired credit score.
- – To reinvest into a higher paying sector. Selling the structured settlement gives you options to choose the best investment opportunity out there in the market.
- – To fund a major and lifetime purchase like land, apartment, car, existing business, etc.
- – To settle a divorce case.
- – To close an education loan or fund a new course.
- – To arrange funeral activities
The process of selling your structured settlement
To make your structured settlement selling process smoother, you should follow a certain process to sell your annuity.
-
Determine the amount of cash you need
Determining the amount of cash is the very first of selling your structured settlement. Remember, you have options to sell from partial to the full amount of your future payouts.
-
Accept a quote from purchasing company
You may approach one or more companies that specialize in buying the structured settlement and receive their quotation. You will certainly hand over your annuity to the company that offers the best terms.
-
Review your contract with your attorney
Your next step is to go to your attorney and financial advisor. You may consult the financial aspects related to the quote with a financial advisor and the legal aspects with your attorney.
-
Obtain court approval
Now, it’s time to get the court approval which is a mandatory step to sell your structured settlement. Your attorney should walk you through the entire process. You need to explain your needs in detail to the court and the judge will decide whether or not selling the annuity will serve your best interest.
-
Receive your money
After court approval, you are ready to receive the lump-sum payment for your structured settlement. At this stage, the purchasing company normally forwards the sale proceeds to your bank account or gives you an account payee check.
