Customization

Structured settlements do not mean that the payment must be the same exact amount for a certain number of years. Instead, structured settlements can be used to meet your needs. You can opt to get a larger upfront payment now to pay off medical bills and legal expenses that were incurred and then receive regular payments for a number of years. As an alternative, you can choose to receive annual payments of a certain amount. Regular payments for a number of years are also available if this is to your advantage. Additionally, structured settlements can be organized in a fashion to keep part of the funds to only be available upon your death. This allows for a structure that can provide to your dependents. The settlement is structured to fit your needs, whatever they may be.

Predictability

Structured settlements provide predictable payments. They do not increase the amount of the judgment; they simply spread the payments out according to your instructions. If you have become disabled due to the cause of action that led to your judgment, structured settlements can help replace the monthly income you have lost. Additionally, income from many lump sum payments winds up in the stock market, which can be volatile and may cause the beneficiary to lose money.

Spontaneity

Unfortunately, it is not uncommon for a person who receives an unexpected large sum of money to waste the money quickly. The thought of being able to buy whatever they want can cause beneficiaries to act impulsively. Often the money is gone within a year. Structured payments can help avert this problem and make the judgment last for many years. This type of payment structure can provide a greater degree of peace of mind since you can depend on the money to be available when you need it.

Tax

Structured settlements are often placed in annuities. Depending on your state of residence, annuities may not be taxed at all or may be taxed at a reduced rate. Lump sum payments are almost always taxed at a higher rate. This difference in the amount of taxes that you pay can greatly affect the net amount of the judgment you receive after taxes.

Factoring

If you have received a structured settlement, but you now need more funds, you can use a structured settlement factoring approach to change your structured settlement into a lump sum payment. Factored structured settlement payments get the cash you need. This option may help you if you need more funds now, if your circumstances have changes, or your life expectancy has decreased. This option allows you to receive a large payment now in exchange for signing the structured settlement, or a portion of it, to a third party.

The Structured Settlement Protection Act of 2002 mandates that the seller must get a judges approval in order to sell. This protects the claimant from unscrupulous financial investors who may use their superior financial knowledge to take advantage of claimants. In the past, they often created contracts for buying the settlement that only favored them and put the claimant into financial difficulties. It also protects the claimant from using the money in a frivolous way and endangering their own and their dependent’s financial future.

There is a clear process for selling a structured settlement:

The current value of the structured settlement is the amount an investor is willing to pay for all the future payments. The present value can be found by using structured settlement calculators online.

It is important to know that it is possible to sell only part of the structured settlement for a lump sum and continue to receive payments in the future.

Once aware of the possibilities, it is time to find a buyer. There are excellent websites that offer sellers the opportunity to have multiple buyers bid on structured settlements. In this way it is possible to choose the best one. It is also possible to find buyers by asking investment firms, banks or through classified ads, but the online bidding sites offer a better chance of getting the best price.

Once a short list of buyers is achieved, each company should be investigated to make sure they are licensed, bonded and insured and recognized by the Better Business Bureau. If, for any reason, the company goes out of business, the seller will still receive the money agreed upon. It is also good to know the past payment records and reputations with insurance companies.

When the buyer is selected, the contract documents are signed and notarized. The buyer must inform the seller that they need to consult an unbiased financial adviser or lawyer. Along with the lawyer, the request is filed with the local court. This can take from 3 to 5 weeks. A hearing will be scheduled where the lawyer and possibly the seller will attend.

The seller will need to explain to the judge why they want to sell the structured settlement and the judge will need to approve these reasons. He or she must agree that a lump sum of money is important to the future of the seller.

If the judge agrees, the documents will be signed and released. These documents will be sent to the insurance company who has also been informed of the possibility of the sale. The seller will then receive their money by wire transfer. The whole process usually takes between six weeks to three months.

The advice of a lawyer is invaluable at this time. There are tax issues involved with receiving a lump sum that need to be understood. A percentage of the money will be given for tax purposes before it ever reaches the seller. If the sum is very large, this could put the seller into a higher tax bracket that will cause financial distress later.