What Is a structured Settlement?
A structured settlement typically results from a personal injury lawsuit. This is an agreement where you agree to accept periodic payments over time in exchange for the release of liability of your claim. A structured settlement can provide payments in almost any manner that you choose. An example is a settlement that may be paid in annual installments over a number of years. Another is getting settlement payments in periodic payouts every few years.
These kinds of payments are generally awarded through the purchase of one or more annuities from a life insurance company. Structured settlements can also be given with lottery winnings, contest prize money and any other situation where there is a substantial cash award.
Structured Settlements May Not Always the Best Fit
Structured settlements are designed to provide some long-term financial security to injury victims through payments that are tax free. For most people, the agreed upon structured settlement payment plan initially makes sense. However if a financial emergency, business opportunity, unforeseen medical expense, or a house purchase can put a strain on the injured party?s finances.
In this case the structured nature of the settlement may get to be too restrictive to cover major financial purchases. A structured settlement may also not be the best option for investing. There are several other investment vehicles that can generate far greater long-term return than the annuities that are used in structured settlements. Therefore, some people may be better off getting cash for their structured settlement payments and then begin building their own investment portfolio.
How Getting Cash for a Structured Settlement Works
If you receive an award from your injury case, your attorney or financial advisor may very likely recommend getting periodic installment payments versus giving you a lump sum of cash up front for your structured settlement. Then an independent third party can purchase an annuity that will provide you with tax-free periodic payments.
Companies that will offer cash for structured settlements have a variety of programs that will allow you to access any portion of your annuity. For an example, you may want to sell as few as four year?s worth of payments and receive a lump-sum payment while still enjoying some portion of your monthly payments. Or you could even sell your settlement for a large payment that is five or six years in the future. You could also customize an arrangement to get cash for a structured settlement based on your own unique needs.
Here is an example of how obtaining cash for a structured settlement works: Let?s say you were in an accident seven years ago. The accident caused you to be hospitalized for several months and undergo nearly a year and a half?s worth of physical therapy. So you hire an attorney and sued the responsible individual-or, rather, the person?s insurance company. Ultimately, your attorney advises you that you will be awarded a substantial sum of money.
After several months or years of negotiation, you receive a very nice sized settlement. However, the cash you will get upfront is only enough to cover the medical expenses you have accumulated. The rest of your compensation is scheduled to be paid out in regular installments through an annuity over the next 15 to 30 years. Instead of being restricted to a monthly or annual payments, you choose to contact a settlement purchaser to secure immediate cash for your structured settlement. You?re then able to use that cash to enhance your current cash flow-rather than waiting on periodic settlement payments.
The Legal Issues of Receiving Cash for a Structured Settlement
If you?re thinking about getting cash for your structured settlement, it?s important to contact a financial advisor. Most states have specific regulations that can limit the sale of structured settlements, so you will need court approval to receive cash for your structured settlement. Federal restrictions can also affect the sale of structured settlements to a third-party individual. Some insurance companies won?t transfer annuities to third parties.
Also, before you even try to obtain cash for a structured settlement, be sure to do your homework. Make sure to check out multiple companies to see which one can offer you the most cash for your structured settlement. You may also want to examine their integrity, reputation and track record. This will help ensure you have the most positive experience obtaining cash for your structured settlement.
Receiving cash for a structured settlement can very well be an ideal option if you need a lump sum of money to satisfy your immediate needs.
Tags: Cash, Settlement, Structured
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