Structured Settlements

Structured Settlements

When you sue another party for any damages or claims, this might result in a settlement. Instead of paying you the entire settlement payments as a one time lump sum, the defendant may agree to give you the payments spread over time, maybe even over few years’ time according to your needs. This type of payment of a settlement, which is made in stages, is known as a Structured Settlement.

Structured Settlements Defined

A structured settlement can thus be defined as – A payment made as recompense to a sufferer of an injury claim or the winner of a large insurance settlement; and where such payment is made in periodic installments as per the requirements of the victim and not as a one time payment.

In a structured settlement, payment can be made in regular installments over a fixed period of time or throughout the life of the claimant. These payments are geared towards meeting special needs of the claimant and can also involve an initial lump sum payment of some amount of the full settlement.

Structured settlement payments are generally made by buying an annuity policy from an insurance company with the proceeds going to the claimant or to his heirs in the case of death of the original plaintiff (if till such time the payments have not been completed). Such payments are tax free under IRC 104 (a)(2) code.

What are the benefits of a Structured Settlement?

• If you have received a structured settlement as a claimant in a personal injury case, then such a settlement can be very helpful in giving you periodic payments as and when you require those most.
• Structured settlements give more tax breaks than a regular lump sum payment and so you can save on tax with such payments.
• For a defendant also, a structured settlement is beneficial, as they do not have to bear the entire burden of the settlement all at once.

Thus both the parties involved can win with a structured settlement.

Selling Your Structured Settlement

Sometimes people, who are given a structured settlement as lottery winnings or an insurance settlement, get fed up of the small payments that are spread over time and want instead a lump sum payment all at once. They might need a bigger payment for some major purchase, such as buying a house. Banks and financial institutions do not give loans against such settlements. Thus in such cases they can look to sell their structured settlement to those who buy such settlements and can get a bigger lump sum amount.

What are the advantages of selling Structured Settlements?

• You can get a bigger lump sum payment in the present.
• Can use it to make major purchases if you so wish.
• Leave the hassle of collecting the smaller payments to someone else.

What are the disadvantages of selling Structured Settlements?

• This will put an end to a steady flow of income.
• You mat not be able to get the full value of your settlement by selling it.
• You will have to pay more in the way of taxes.

If you are interested in selling your structured settlement, do not go with just one buyer but shop around to see where you can get the best value for your settlement. A court has to approve the sale of these settlements and this usually takes around 70 days from the initial contract with a buyer to the final lump sum payment. So be aware of anyone telling you they can get the sale done in much lesser time. Take the effort to find a legitimate company that buys structured settlements.