According to US Legal (opens in new tab), a structured settlement is an ‘agreement in a lawsuit by which specific payments are made over a period of time’. These settlements are designed to provide those who won the lawsuit (or any kind of claim with a payout) with regular payments so that they can recover from economic loss or get through difficult times. Sometimes, structured settlement annuity companies (opens in new tab) are commissioned to help people manage these finances.
Generally, structured settlements are put in place when the overall amount of money agreed to in the settlement is fairly large, smaller sums tend to be paid in full. The monies are then put into an insurance product that ensures payments are made on time to the right people in the right time frame.
There are different options available to you when you first choose to forge ahead with a structured settlement. Companies like J.G. Wentworth (opens in new tab) and Fairfield Funding (opens in new tab) specialize in helping you manage settlements, and will offer you a series of options. You can either start receiving the agreed payments immediately, or you can defer them to a later date that suits. Some people prefer to leave their structured settlements until they retire, using them like a retirement fund, others prefer to start receiving the payments immediately so that they can rebuild their lives. These funds can be further structured in terms of how often you’re paid, the amounts you receive, and the time frame over which you plan to get the payments. All these details are usually sorted out at the end of the case.
Why a structured settlement annuity?
Structured settlements have gained traction over the past few years for a number of reasons. They are a way of ensuring your financial security over the long term, they are reliable payments, and they are exempt from all income taxes, even if you earn interest on them. The Federal Periodic Payment Settlement Act (opens in new tab) explains the income tax breaks and terms of structured settlements, and is one of the reasons why these payment terms are so popular.
However, structured settlements can be fairly limiting. You’re stuck with the amounts you agreed with and you can’t change the terms once you’ve signed. You can’t access the money if you have sudden and unexpected financial needs, even though it’s technically yours, and you can’t move the funds to an investment fund that offers you better returns. There are also fees associated with accessing money from your structured settlement before a certain date, and you are facing some taxes that will vary dependent on how you approach your settlement and what you need to do.
This is why structured settlement buying companies have become extremely popular. They will purchase your structured settlements and pay you a lump sum straight away. You will lose some of the money to fees and taxes, but you get to access the settlement on your terms. If you want to buy a home, pay for education, sort out an unexpected medical bill or ensure you remain financially stable during a period of unemployment, then selling your structured settlement can make all the difference. This also helps you to bypass the complexities of dipping into the structured settlement or the limitations of changing it.
However, not all companies that purchase structured settlements are created equal. You will need to check up on their credentials and read reviews, and go through customer reviews on accredited sites like Consumer Affairs to make sure you’re on the right track. Don’t leap into the first offer you get, pay attention to market rates and trends, and be prepared for the process to take some time. Rushing through it may see you get settled faster, but it could cost you in terms of the final amounts you receive. Don’t short-change yourself: do your homework and expect to wait for your funds. If you need to bridge a short-term gap in funds, getting a personal loan online (opens in new tab) might be more prudent than wasting your settlement on bad terms.
Selling your structured settlement
The process of selling your structured settlement is usually fairly straightforward. While most companies have their own processes and fees and costs, they will follow a straight line from application to quotation to court application to payment. You can choose to sell all of your structured settlement at once or you can choose to only sell a part of it. A reputable company will provide you with expert support when making this decision, helping you to understand the ramifications, the costs and the benefits of each option. It will also help you through the process of completing the paperwork, getting your matter in front of the courts, and resolving any issues that arise along the way.
Look for companies that have proven results and solid financial foundations – you don’t want to hand over a process as delicate and important as this to someone who doesn’t have the right credentials – and companies that offer solid legal advice. It’s a good idea to consult with your own lawyer before making any final decisions or signing any paperwork, they’ll be able to catch anything you may miss and ensure that you’re getting the best possible deal.
The process of selling
The application process for selling your structured settlement isn’t fast. Many companies like Strategic Capital (opens in new tab) do offer you the option of applying online, but you will need to submit a lot of paperwork and work with a consultant before you get an accurate quote. This is understandable – the company has to use the latest figures and market rates and needs all the information before it can make you a solid offer. Be prepared to answer questions and fill in forms and send in even more forms. It may be tedious, but it means that the company is following due diligence.
The next stage of the process is the court application. The court has to approve your sale before anyone can forge ahead with handing over money. Expect more box ticking and form filling as you move through this part of the process. Once the company has put the application before the judge you will have to wait to find out if it is approved and then you’ll have to wait for your payment. It can take up to 45 days to get court approval and then it can take another month for payment, depending on the company you chose.
Selling a structured settlement is not a spontaneous decision or instant financial fix. It can take up to six months, depending on paperwork and circumstances, to get paid so this is more of an investment into something you will need over the long term. That said, selling your structured settlement allows you to get hold of funds you need and to use them in a way that best suits your life and your future.