What Is A Structured Settlement?
A structured settlement is a legal settlement paid out as an annuity rather than in a lump sum, usually with certain tax advantages for the recipient and a savings for the payer.
More particularly, a personal injury victim (ie someone injured in a car crash, workplace, through medical malpractice, product liability or as a result of the wrongful death of a loved one as well as many other examples) oftentime will commence a court legal action against the alleged wrongdoer or wrongdoers. In the vast majority of cases, the legal proceedings settle prior to trial. There can be many reasons for settlement, expensive legal fees, complex liability issues, time, mental stress to name a few. Settlement can often consist of the defendant or defendant’s insurance company making a one-time lump sum payment to the personal injury victim. In other situations however, for example if the personal injury victim has sustained injuries that will result in damages occurring over many years, or in situations where the victim is a minor and it is unwise to award a large sum at such a young age, parties may decide to enter into a structured settlement.
A structured settlement is set up whereby the defendant or defendant’s insurance company makes a one time lump sum payment to a third party “owner/obligor” who in turn uses the lump sum to buy an annuity paid by a life insurance company to the individual. The lump sum never ends up in the hands of the personal injury victim, but rather is paid to that person over many years into the future. The payment schedule is completely flexible in its creation, but becomes fixed and inflexible once set in place and can be either weekly, monthly, bimonthly, annually, periodic lump sums or a single lump sum way into the future, or a combination thereof. The goal is to create a payment stream that best addresses the future monetary needs of the personal injury victim.
A structured settlement can be either guaranteed (paid in any event of your death and passed onto a beneficiary designated by you) or life contingent (payments cease upon your death) or a combination of both.
Who Pays A Structured Settlement?
Structured settlements are paid by one or more life insurance companies called “annuity issuers”, usually very well rated and highly reputable. These are companies that many would consider household names. Life insurance companies in the US are highly regulated by the States so as to give peace of mind to the policyholders.
How do I know if I am Getting a Structured Settlement?
If you are receiving payments or will be receiving future payments pursuant to a fixed payment schedule, tax free, paid by a life insurance company (either by check or direct deposit) as a result of a personal injury sustained by you or a loved one, chances are have a structured settlement.
Structured Settlement Advantages
They provide income replacement or compensation for ongoing injuries over a long period of time.
The life insurance companies are State regulated to protect against default. Should an issuer become insolvent, State Guaranty Associations are obligated to step in and make payments up to a limit.
All payments are tax free.
Payments may, in some cases, be protected from bankruptcy and spousal claim upon a divorce.
What are The Disadvantages of a Structured Settlement?
Some disadvantages can include:
- Payments are inflexible & may no longer address the financial needs of the person. Maybe injuries have healed & now you want to buy a house, buy a car, go back to school, pay for an expensive medical procedure, get out of debt, or provide financial assistance to a loved one.
- The annuity may have been inherited & the beneficiary does not need the payment stream but would rather have a present value lump sum cash in hand now.
- Payments may be so far out into the future that you may not be around to receive them.
Can I Sell My Structured Settlement?
Structured settlements are set up with a split ownership and payee (beneficiary) structure. As such, you do not own the structured settlement and therefore you are not free to sell it like you would a house or a car.
However, since about 2002, State and Federal laws do permit you to sell your structured settlement payment rights you are entitled to receive pursuant to the structured settlement to funding companies such as Genex Capital provided a court order is obtained in accordance with Federal and relevant State Laws and a judge determines that such a transaction is in your best interests.
With some limitations, you can generally decide how much or little of the annuity payment rights you want to sell and keep. At Genex Capital we work with you with the goal of finding the best solution that fits your financial needs.
If you do decide to sell all or some of your future structured settlement annuity payment rights then at the completion of the transaction, you will receive a discounted present value lump sum payment that is also tax free. This amount will be negotiated and agreed upon by you prior to completing the court process.
Restrictions On Sale
Please note that some restrictions may limit your to ability sell structured settlement payment rights. These include but are not limited to:
- Your settlement is as a result of a workplace, workers compensation injury. Its is not legal for you to sell a worker’s compensation annuity in any State.
- You must be age of majority; no minors can sell.
- You must be of sound mind
- If you were a minor at the time of the settlement but you are over 18 years old now, you must consult the original settlement agreement and court order to determine if there are assignment restrictions.
- If the settlement is held by a trust for your benefit, there may be restrictions disallowing the trustee to sell on your behalf.
- Some States have highly restrictive discount rate limits (ie North Carolina)
- If a judge hearing your case does not believe the sale is in your best interest, then he or she has complete discretion to deny the case.
What Is The Process To Sell My Structured Settlement Payments?
1. Consult your structured settlement annuity policy to determine what payments remain due and owing to you. If you have sold payments in the past you should also note those payments that are no longer available for sale.
2. Calculate how much cash you need.
3. Contact a reputable structured settlement funding company, a company that has been in business for at least 10 years. If you are unsure of which company to contact, you may want to try hiring a service such as www.Structuredsettlement-quotes.com or www.Quotemeaprice.com, who will shop your payments to only reputable companies to get you their best price.
4. Working with the funding company, determine what is the best solution for your cash needs. You will be provided with a price quote that sets out the payments you will be selling, the purchase price, and the discount rate involved.
5. Accept the offer and you will then be provided with a structured settlement sales package to sign and have notarized. Genex Capital arranges a notary public in your area to meet with you, discuss the document package and arrange for its signing and notarization all at no charge to you. You can do this in the convenience of your own home.
-State Required Disclosure Statement
-Sale and Assignment Agreement
-Spousal Consent form
-Independent Professional Advice or waiver form
-Limited Power of Attorney
-Request for Wiring Instructions (for sale proceeds to be wired into your bank account upon transaction closing)
6. Once the document package has been returned and the mandatory cooling off period has expired (as determined by the State you reside, but usually 3 to 10 days) the funding company will file a court petition with the State Court usually in the county in which you reside.
7. You will be notified of the court hearing date, which date shall not be less than 20 days after the petition has been filed.
8. You will need to attend court on the specified date and will be accompanied by the funding company’s lawyer (and your lawyer should you choose to retain one) so as to speak to the judge hearing you case so as to allow him or her to determine that the transaction is in your best interests. Usually the hearing lasts about 30 minutes or less.
9. In the vast majority of cases, the judge will approve your case during the hearing and grant an order transferring your structured settlement payments to the funding company in return for the agreed upon purchase price. Genex Capital has a 92 percent success rate at these hearings.
10. Following receipt of the court order, the funding company will complete the closing measures and fund you the agreed upon amount. Genex Capital commits to funding its clients within 10 business days following receipt of these documents. Genex Capital funds by wire transfer of immediately available funds directly to your bank account. There is no hold period and you can use the funds immediately. The monies you receive are TAX FREE.
Laws & Structured Settlements
Some of the laws that govern the sale of a structured settlement include these:
s. 104 (a) (2) of the Internal Revenue Code states that the amount of any damages received whether by suit or agreement, whether lump sum or periodic payments, on account of personal physical injuries or sickness is not considered taxable.
s. 130 of the Internal Revenue Code provides that any amount received for agreeing to a qualified assignment (structured settlement process) shall not be included in gross income to the extent that such amount does not exceed the aggregate cost of any qualified funding assets.
s. 5891 of the Internal Revenue Code sets out the acceptable court ordered transfer process so as to allow proceeds of the sale to also remain tax exempt.
Additionally, state transfer statutes apply to the transfer process. You should consult the statute of the State in which you reside and/or the State in which you obtained your original settlement.
Your structured settlement payments are a significant asset. You should think carefully about the benefits of keeping these payments verses selling some or all to unlock their present value so as to achieve your goals in life.
Genex Capital is here to help. We have experienced Account Executives standing by to discuss your situation and help you to customize a solution that best suits your needs. Our no-obligation consultation service is free of charge and we are available 7 days a week, 12 hours a day.
Give us a call and see what your payments are worth.
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We buy structured settlement payments, lottery payments, investment annuities, and other future payment rights from individuals throughout the U.S. and Canada. We are committed to offering a better price as well as our wealth of experience to complete the transfer process in the shortest time permitted by law—usually within 5 to 7 weeks.
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