How to Purchase Structured Settlement Plans
Those who get in accidents and receive payments from insurance companies as compensation
for their injuries often receive structured settlements. A structured settlement is a series of
payments made on a predetermined payment schedule to an individual or group of
individuals. These payments are usually made in an effort to cover future medical expenses
and lose of wages due to affects of the accident. People to whom these settlements are paid
have the right to sell them if they so choose.
Those who are looking to sell their settlement are basically saying they would rather have a
lump sum of cash now than continue to receive small payments over time. Once these types
of settlements go on the market they make attractive investment options because in exchange
for a lump payment now, you receive payments over time that will eventually exceed the
payment you made up-front. The only risk in this investment is if the company who issued
the settlement declares bankruptcy, but this can usually be avoided if you properly research
the issuing company.
When the seller finally does sell the settlement they receive say 65% of the final value of the
settlement, but they receive the payment now. This can be advantageous if you need the
money immediately. The one who purchase structured settlement will take over receiving the
payments for the remainder of the term which guarantees them a regular income. Obviously
this means the purchaser receives more money overall in the long run and makes an above
average return on their investment.
There are tons of reasons why someone would want to sell their structured settlement.
Chiefly among these is when someone falls on financial down times. Typically people who
are dependent on a structured settlement are this way because they have not set themselves up
very well financially without it. So when they find themselves in a situation where they need
money they are likely to explore options to sell their settlement. This gives them money now
for the long term income.
You can contact your financial planner if you want to know how to purchase structured
settlement but basically you will be offered a few options of what type of settlement you want
to buy. You need to consider how frequent you want the payments to be and over how many
years. You can purchase a settlement of your own; where you buy a fund that will pay you
back over time with interest or you will buy a settlement someone else is selling.
Buy Structured Settlements or Sell Yours For Cash Now
You need someone to buy structured settlements in order to off-load yours and get a lump
sum in return. A structured settlement is a financial or insurance arrangement where
someone who has been awarded a settlement or sum of money in order to make recompense
for some sort of wrong doing and often you can buy structured settlements as investment
opportunities. This can be done as the result of an injury or any other damage to person or
property. Structured settlements were started back in the 1970’s as an alternative to making
large sum settlement payments. Structured settlements are now a part of the statutory law of
several countries including; Australia, Canada, England and the United States. Although
there are some similarities between the different countries laws, the general structure is the
same. Settlements usually include income tax and spendthrift requirements as well as other
named benefits. Settlements are also referred to as ‘periodic payments.’ A settlement that is
included into a trial judgment is called a ‘periodic payment judgment.’
If you are looking for someone who wants to buy structured settlements you are looking for a
company that will also purchase structured settlements from you in order to then re-sell on
the open market in the form of a bond of some kind. When buying structured settlements
these companies are essentially buying a security backed investment that pays out monthly.
In order for them to make money after buying it from you they have to sell it for more than
they bought it. Which means you will not get full value for the annuity. In order to get the
best idea on how much you can expect from a settlement, you need to get free quotes from
the companies that buy them.
The United States has taken steps to legislate structured settlements on both the state and
federal levels. The Internal Revenue Service regulates the taxation laws in its Internal
Revenue Code. State laws usually control the periodic payment structures in the judgment.
Medicaid and Medicare also affect the dispersing of funds in a structured settlement. Often
where Medicaid and Medicare are involved structured settlement payments are incorporated
into what are referred to as ‘Medicare Set Aside Arrangements’ or ‘Special Needs Trusts.’
Settlements are endorsed by some of the nations largest disability rights organizations,
including the American Association of People with Disabilities and the National
Organization on Disability.
Suze Orman is a well know TV financial analyst who wrote in a column that structured
settlements ‘provide ongoing income and reduce the risk of blowing a lump sum though poor
financial choices.’ In response to a readers question she added that financial security can be
improved, ‘if you use the structured payouts wisely.’
Typically a structured settlement is set-up as follows; An injured party (the plaintiff) settles a
dispute with the defendant and or its insurance carrier for car accident compensation as an
example. Like the lawyer in your town who says he’ll sue the insurance company for you.
The defendant agrees that rather than a lawsuit they will pay you a specified amount of
money. This specified amount is paid out over time in one of several ways. Basically they
find some sort of long term pay structure where they know they will continue to receive
payments. Ironically one of the most common assets to fund a structured settlement is a life
insurance policy, or series of policies. They are high yield and create a constant income flow,
so if you sue your neighbor for running over your cat and you settle for $20,000 – there is a
good chance his brother’s life insurance payments are funding your settlement.