The Settlement Market

With all these settlements awarded to people, a market for settlements was formed from the need for people to turn future payments into current cash. Companies that deal specifically in assisting beneficiaries in converting their structured settlements are becoming more common. Still, the cost of redistribution of funds can be costly.

Those who have received (or are still receiving) regular payments are well aware of the unsolicited proposals from individuals and companies hoping to take advantage of mismanaged finances. The more unscrupulous companies have discounted the future annuity payments by as much as 40%, locking in a sizable risk-adjusted return. Due to this situation, about two-thirds of US states have enforced restrictions surrounding tax-free structured settlements.

Also, some insurance companies will not assign or transfer annuities to third parties in order to discourage the sale of structured settlements.

Some institutions will allow the partial sale of future payments. A majority of structured settlement sales are arranged in this manner, in which beneficiaries sell only the minimum portion of payments necessary to cover the most immediate of circumstances.


If you're considering selling all or a portion of a structured settlement, study the reputation of the company providing the payments. Don't get involved with a company that might become insolvent before paying out your buyout money. Also, consult with an attorney and a tax advisor before entering into any transactions. Approach potential buyers through a structured settlement broker who can compare and contrast differing offers for you and has the resources to provide legal and transaction guidance.

Take my money,

Phil

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Are Structured Settlements Right for You?

Part 3 of the Structured Settlement posts, this will briefly explain why a structured settlement would be good (or not) for you.

Structured settlements are a good way to solve your financial issues as a personal injury claimants or a beneficiary of a large money claim. Other than the tax benefits and security of receiving periodic payments, structured settlements are beneficial for people who don't want to deal with investing their proceeds or who don't have the knowledge to do it correctly.

Structured settlements may be right for people who:

• are temporarily or prematurely disabled
• have limited financial expertise
• are minors or unable to handle their own financial affairs
• require savings for housing, education or other large future obligations
• have been injured or have ongoing medical expenses

Take my money,

Phil

Structured Settlements Payments

Back to structured settlements. As a reminder, these are regular compensations given to people who are awarded large amounts of cash, usually from a civil suit or a claim.

The installment payment arrangements are structured agreements that pay periodically. These periodic payments vary in form.

1. Yearly Payments: Payments are divided into equal amounts and distributed for the duration of the agreed-upon period.
2. Inflation Hedging: Payments are made in inflation hedging can fluctuate over time, depending on inflation or deflation in the economy.
3. Monthly Indexed Installments: Payments that can change in amount due to some financial index that is tracked over time.
4. Differed Payments: Payments are paid in unequal amounts over a fixed period of time in order to cover expected expenses over the contract period.
5. Measures for the Future Care of the Recipient: Payments are made to cover such things as periodic medical or housing expense that may vary from period to period.

Annuity Payment Pros
The advantage of receiving annuity payments is the tax benefit. Many structured settlements are not taxable, or may significantly reduce a person's taxes as compared to a lump-sum distribution. Even those structured settlements that are deemed taxable can provide tax benefits. Income taxes can be deferred to the period in which the payment is made, as opposed to paying the lump-sum tax in the period in which the award is made.

This is the reason lottery winners are given a choice between receiving their winnings as an annuity or in entirety. In some cases (usually in the case of minors or people deemed unfit to manage their own finances), a lump sum is not awarded by design.

Annuity Payment Cons
Once the arrangements of distribution in a structured settlement are made, they cannot be changed. Depending on the legal structure of the settlement, the beneficiary may or may not use a structured settlement as collateral for a loan or another investment option. This is especially true if the payments are not taxable, since federal law prohibits the encumbrance of these tax-free benefits.

Take my money,
Phil

Whats a structured settlement

The basics

A structured settlement is a financial or insurance agreement that a person accepts in the case of injury, rather than taking a one-time monetary payment. Settlements usually arise from some legal claim, and provide a person with a specific amount of money for a fixed period of time. Although structured settlements can provide comfort for a period of time, this method of payment may create problems for people who require liquidity in order to take care of current financial obligations, like in the case of emergency situations when the structured payments aren't enough to cover expenses.

Due to the number of structured settlements that are active each year, a market for these has developed and allows owners of these settlements to trade them if their financial situation requires it. These options, although possibly a good thing for people experiencing short term financial issues, should be considered as a last resort. An example of the use of this market would be to sell your life insurance policy to avoid high premiums.

Types of Structured Settlements

A structured settlement is usually a method of compensation paid to a person who has been awarded a large amount of money from a civil suit or an insurance claim. There are two common ways to fund the obligation which a party responsible for paying the claim will generally use. First, the buy-and-hold method. The party purchases an annuity from a life insurance company. Second, the assigned method. The settlement obligation is assigned to a third party, which in turn purchases an annuity like in the first method. 

Take my money,

Phil