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If you’ve ever thought about investing in structured settlements, this guide to how to purchase structured settlements will educate you on what you need to know.
Introduction
There are many legal requirements and restrictions that affect who can buy structured settlements, so if you are interested in purchasing a structured settlement, you will want to work with a company who matches structured settlements with investors.
What are Structured Settlements?
When law suits are settled, damages may be awarded in a lump sum, or a series of payments. A settlement which is awarded in a series of payments over time is called a structured settlement. Structured settlements are generally created by using a third party intermediary to provide the financing.
Benefits of a Structured Settlement
One significant advantage of a structured settlement is tax avoidance. With appropriate set-up, a structured settlement may significantly reduce the plaintiff’s tax obligations as a result of the settlement, and may in some cases be tax-free.
A structured settlement can protect a plaintiff from having settlement funds dissipated, when they are necessary to pay for future care or needs. Sometimes a structured settlement can help protect a plaintiff from himself – some people simply aren’t good with money, or can’t say no to relatives who want to “share the wealth”, and even a large settlement can be rapidly exhausted. Minors may benefit from a structured settlement as well, such as a settlement which provides for certain costs during their youth, an additional disbursement to pay for college or other educational expenses, and then one or more disbursements in adulthood. 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.In some situations, it will be better for a severely disabled plaintiff to set up a special needs trust, rather than entering into a lump sum or structured settlement. Any plaintiff who is receiving, or expects to receive, Medicaid or other public assistance, or the guardian or conservator entering into a settlement on behalf of a disabled ward, should consult with a disabilities financial planner about their situation before choosing any particular settlement option or structure.
Potential Disadvantages of Structured Settlements
Some people who enter into structured settlements feel trapped by the periodic payments. They may wish to purchase a new home, or other expensive item, yet be unable to muster the resources because they can’t borrow against future payments under their settlement.
Some people 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.
How to Purchase Structured Settlements
State and federal law may restrict the sale of structured settlements, and there are many legal complications that can arise. Since you’ll be exchanging cash for the right to receive future payments, you’ll want to make sure that you are protected.
Work with an established broker.
Look for a structured settlement financing company who is a member of the National Structured Settlements Trade Association who also places settlements with private investors.
Get multiple quotes to ensure you get the best deal.
Retain an attorney to review the agreement to ensure your interests are protected.
Selling a Structured Settlement
If you have a structured settlement, you may have been approached by a company interested in purchasing your settlement, or may be curious about selling your settlement in return for a lump sum buyout. About two thirds of states have enacted laws which restict the sale of structured settlements, and tax-free structured settlements are also subject to federal restrictions on their sale to a third party. Also, some insurance companies will not assign or transfer annuities to third parties, to discourage the sale of structured settlements. As a consequence, depending upon where you live and the terms of your annuities, it may not be possible for you to sell your settlement.
Keep in mind that companies which buy structured settlements intend to profit from their purchase, and sometimes their offers may seem quite low. You may benefit from approaching more than one company in relation to the sale of your settlement, to make sure that you obtain the highest payoff. You also want to be sure that the company which wants to buy your settlement is established, well-funded, and reputable – you don’t want a fly-by-night outfit to obtain the rights to your annuities but to disappear or go bankrupt before paying you the buyout money. You may have to go to court to get a judge to approve the buyout. It is usually a good idea to consult with a lawyer before entering into an agreement to sell your settlement.
Let Look At A Structured Settlements Purchase
A structured settlements purchase can be sold in the majority of states in the U.S. In most instances, the process for a structured settlements purchase will be relatively risk free, however it never hurts to educate yourself in your own time about all that is involved in the process.
A structured settlements purchase can take place over a period of anywhere from 10 to 14 days, depending upon the company you are selling to and the insurance company that you are dealing with.
If you decide that you wish to sell in order to receive a lump sum payment then the documents for the structured settlements purchase must be forwarded to the buyer. The documents for the structured settlements purchase must clearly list the name of the insurance company on the agreement. The structured settlements purchase document must also clearly state what the settlement payment plan is.
As the talks regarding a structured settlements purchase begin, the prospective buyer would suggest a quote. With the help of your broker and attorney you can take a look at the structured settlements purchase quote and decide if it is in your best interests or not. The buyer will also provide you with a structured settlements purchase policy as well as a settlement agreement.
When it comes to a structured settlements purchase the both of you must come to an agreement together involving all of the issues that surround the settlement as well as the fees. Make sure you find out all there is to know about the structured settlements purchase before you move ahead with any and all negotiations.
The buyer of the structured settlements purchase can then fill in an application and send it to the court for approval. The court then must take the structured settlements purchase application and ensure that it is beneficial for both parties. In particular, the courts want to make sure that when it comes to a structured settlements purchase, that as the seller, you are protected as much as you can be.
As far as the structured settlements purchase is concerned, the company would do the processing and the fee for the transaction so the seller does not have to foot the bill for it. It is important to find out what the laws are regarding a structured settlements purchase. The laws are not the same for every state. In some states the process may be more complicated than others.
A structured settlements purchase is something that requires a great deal of research. Seek out counsel and be discriminating when it comes to searching for a buyer for your structured settlements purchase.
