Purchase Structured Settlements

20 Feb 2011

Why would a company want to purchase a structured settlement from a person receiving regular installments in compensation for a personal injury? The answer is clear: the company is guaranteed a steady, safe cash flow that is generally not taxable in return for a lump sum of money of about half the value of the full-term settlement. When companies buy a structured settlement they are always getting the better end of the deal, no matter how appealing the quick cash may seem to the seller. These companies are generally not out to make life better for injured persons, but instead are seeking to profit from those persons' pressing financial needs or eagerness to be free from what may seem to many like an allowance. This is why persons wishing to sell settlements need to be very, very careful about who they sell those settlements to.

First of all, exactly what are structured settlements and how do such arrangements work? When a person wins a lawsuit based on worker's compensation, personal injury, or medical malpractice, often the court will rule that compensation be paid in installments, either in small, regular amounts or a few lump sums over the years. Often, these payment plans will cease upon the death of the payee, whether or not there are dependents involved. Before accepting a compromise, injured persons need to work closely with lawyers to ensure that the settlement is going to benefit them to the fullest possible extent in order to prevent future financial distress and the loss of well-deserved compensation. This careful planning will prevent the undesirable necessity of finding a company to purchase a structured settlement from its possessor when he finds that waiting for a monthly check isn't a tolerable system.

If, however, a person has already settled a legal case and finds that the periodic payment plan is not working for him or decides that larger amounts of money are needed immediately in order to purchase medical equipment, a customized vehicle or home to accommodate injuries, or similar items, or does not expect to live long enough to benefit from long-term compensation, may want to consult various companies that offer to buy a structured settlement. Such companies will allow him to sign over annuities in exchange for immediately accessible cash. Persons considering this option should know that while their annuities are not subject to taxation, the lump sum received from a third party may very well be, causing them to lose even more well-deserved money. This is a decision that requires long, hard thought and should not be entered in to hastily or lightly, as its consequences can be disappointing at best and catastrophic at worst. If a person is confident in his investing and money-handling skills, he might be able to pull off the sale of his annuities aptly, but this is not always the case.

In general, this option is a very bad investment decision, as it is possible to lose up to half of one's settlement money in the process. Plus, persons on a periodic payment are often unable to work and need the regular installments to meet their daily needs; if these payments cease and the person is unable to support himself by working due to injuries, his financial need will be much greater than before a company agreed to purchase a structured settlement from him. A Biblical proverb sums up this situation very well: "The simple inherit folly, but the prudent are crowned with knowledge" (Proverbs 14:18). This is a financial decision that could end in folly, especially if rushed into without sufficient forethought and good legal advice.

If a person is absolutely sure that finding a company to buy a structured settlement from him is the most viable option, there are a few ways to ensure that the owner receives the very best deal. First, he should compare quotes at different settlement companies to see which is going to give him the highest payoff with the fewest risks; many online companies allow customers to get a free quote over the Internet. Next, he should be sure that the chosen company has a good reputation for paying its customers in-full and on time and that it is well-funded, licensed, and insured so that it doesn't go bankrupt and leave him with nothing. After selecting a trustworthy company, the person should consult a lawyer to ensure that proceedings are in his favor and that the sum received in return for annuities is reasonable and fair; he may choose to sell the entire settlement or only a part of it--the latter, of course, is the best choice. By following these steps, selling one's settlement may be a safe, prudent, and beneficial option for a person in financial distress.

It is important to know that selling one's annuities is not always a possibility. About one-third of states have laws that do not allow businesses to purchase a structured settlement, and some insurance companies are not willing to transfer annuities to another entity. In this case, a person will have to find another solution for their financial needs besides selling. Persons who are unsure whether their state of residence restricts such sales should consult a lawyer for advice. For the other two-thirds of the country, however, finding a company to buy a structured settlement is a feasible, if not advisable, option--a last resort for the financially stressed, sure to offer immediately accessible funds in a very short time frame.
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