A structured settlement is a payment for the settlement of the case in several installments made over time rather than through a single transaction. This only happens when a plaintiff settles a case for a large sum of money where the defendant, the plaintiff’s attorney, or a financial planner is consulted in association with the settlement.
This is advantageous for the fact that through this process the collection of tax is avoided. Using the appropriate set-up, it may significantly reduce the plaintiff’s tax obligations or in some cases the transaction may be tax-free. It can also provide for payment in pretty much any schedule the parties choose. A structured settlement can protect a plaintiff from having settlement funds dissipated, when they are necessary to pay for future care or needs. And sometimes this helps protect a plaintiff from himself when he is not good in the use of money. Minors may also benefit from a structured settlement as well, because this may be utilized to pay for college or other educational expenses. While an injured person who has long-term special needs may benefit from having periodic lump sums with which to purchase medical equipment or modified vehicles.
This is somewhat disadvantageous because some people who enter into structured settlements feel trapped by the periodic payments. They can’t borrow against future payments under their settlement and therefore they can’t use money to buy expensive items. Others will do better by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.
If you have a structured settlement, you may have been approached by a company interested in purchasing your settlement, or ask you to sell your settlement in return for a lump sum buyout. Many states have enacted laws which restrict the sale of structured settlements and subjected tax-free structured settlements to federal restrictions on their sale to a third party. Likewise, some insurance companies do not allow the transfer of annuities to third parties, to stop the sale of structured settlements. It therefore depends upon where you live and the terms of your annuities for you to possibly sell your settlement.
Companies that buy structured settlements intend to profit from their purchase thereby the prices of their offers are reasonably low to acquire profit. You can benefit if and only if you approach the most possible number of companies to make sure that you obtain the highest payoff. Be sure that the company which would buy your settlement is established, well-funded, and reputable to secure that your annuities would not disappear or go bankrupt before they pay you the buyout money. Consulting with a lawyer before entering into an agreement to sell your settlement would be much better.
Any person entering into a purchase of structured settlement should be on guard for potential exploitations such as excessive commissions, overstated value, and self purchase of the settlement by your own lawyer, life expectancy, and use of multiple insurance companies.